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IT’S A NUMBERS GAME TEXTING: THE FINAL FRONTIER? TRACING ON COMMERCIAL DEBT BACK TO LETTERS TO GET ATTENTION STEPS TO COLLECT CREDIT CARD DEBT REMAIN COMPLIANT Next generation skip trace AND solution from the primary

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James L. Stewart

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July/August 2016

Vol. 16, No. 4

IN CREDIT CARD DEBT

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TRACING COMMERCIAL DEBT TEXTING: THE FINAL FRONTIER? BACK TO LETTERS TO GET ATTENTION STEPS TO COLLECT CREDIT CARD DEBT AND REMAIN COMPLIANT GETTING INSIDE THE HEADS OF REGULATORS 4 SECURITY LEVELS YOU SHOULD UNDERSTAND

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PROGRAM ON PAGE 26 July/August 2016 | Vol. 16, No. 4

James L. Stewart

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July/August 2016

CREDIT CARD COLLECTIONS

e m o c l e W C

redit card debt is forecast to reach $1 trillion this year. Accordingly, the CFPB has taken a particular interest in making sure collectors stay within their sometimes vaguely drawn lines of compliance. This issue is dedicated to credit card collections by providing best practices for the modern collection professional. This issue features Ron Brown’s take on skip tracing in commercial collections and how the trail differs from other types of debt. Debra Ciskey brings you to the front row of several recent collection industry functions featuring speakers from the FTC and CFPB as she recaps the highlights and what they mean for collections. Sam Edens approaches the topic of texting and how your software can make it a plausible part of the collection process. Sam Eidson presents simple steps that can help keep your credit card collections compliant. Fred Blitt talks about some revealing numbers concerning the CFPB’s interest in credit card collections. Harry Strausser makes some recommendations concerning leveraging letters against the crippling TCPA. I recap the conversations I had concerning collection technology at the DBA International convention. According to Collection Advisor’s 2015 Reader Survey, 85% of readers requested training courses with quizzes for updates on compliant collection practices. This issue will be launching the Collection Compliance Education (CCE) program. The quiz covers compliance information presented in this issue of Collection Advisor as well as general information for collecN MPLETIO ATE OF CO CERTIFIC tion professionals. Upon submise Do John sion of a completed quiz, assuming a passing score, the collection professional will be emailed a certificate indicating that he or she is dedicated to continuing their compliance education. Next issue Collection Advisor will be recognizing the Most Influential Women in Collections as well as taking a closer look at medical debt collection. Until next time, we look forward to hearing from you. nted to

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ADVISORS

Volume 16, No. 4

FEATURES

SKIP TRACING ADVISOR

Tracing Commercial Debt Ron Brown

4 Security Levels You Should Understand

LEGAL COLLECTION ADVISOR Under One Half of 1% are Actual Credit Card Complaints

SARAH MORRIS

Agency Spotlight: Game for Anything in Credit Card Debt

James L. Stewart of Sentry Credit

Fred N. Blitt

Mid-Range Collection Software Overview: Growing with Your Collection Software Comparison Chart

BENCHMARK ADVISOR

Back to Letters to Get Attention Harry A. Strausser III

TECHNOLOGY ADVISOR Texting: The Final Frontier? Sam Edens

COMPLIANCE ADVISOR

JOSHUA FLUEGEL

Mail Services Software Overview: Innovative Letter Solutions Increase Payments

INTRODUCING

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Getting Inside the Heads of Regulators Debra J. Ciskey

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Steps to Collect Credit Card Debt and Remain Compliant Sam Eidson

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Tracing Commercial Debt

ROUTING SLIP Initials

In this issue we will take a look at tracing on commercial debt. With commercial debt the first thing the tracer must establish is liability. Who is responsible for the debt? This action is accomplished by going back to the origination of the indebtedness for basic information. Commercial debt may have been created by a corporation (Inc.), a limited liability corporation (LLC) or any individual purchasing a product for resale or commercial use rather than consumer use.

Corporations When tracing a corporation, the tracer must

fully understand the “corporate veil.” This veil insures that a company is treated as a separate legal entity than registered owners and stakeholders. The company is then liable for its debts, not the individuals who own it unless those individuals have signed a letter of guaranty. If there are letters of guaranty, then the tracer may proceed to locate the principals of the corporation who signed the personal guaranty. If there are no letters of guaranty, the tracer must determine if there are any corporate assets which might satisfy the debt and who might be in control of those assets. A starting point for the tracer with any corporation is the incorporation documents which are usually held by the Secretary of State in the state where the corporation was formed. The incorporation documents should provide the tracer with the names of the incorporators, the names of the shareholders and the name of the legal service agent. After obtaining this information the tracer then should contact each person involved to determine if there are corporate assets available. The tracer at this point is tracing assets rather than actual people.

Limited Liability Corporations

When tracing on a LLC the tracer should pay particular attention to the fact that a limited liability corporation only offers liability and financial protection if the corporate veil is not pierced. The corporate veil is pierced if an individual uses the LLC to pay for personal expenses, does not maintain LLC paperwork, or pays LLC bills out of a personal account. The limited liability of the LLC can then be challenged by creditors, who can sue the private individuals for the outstanding commercial debt. If this is found to have occurred during the tracing process the tracer would resort to standard tools and techniques to locate the private individuals involved and any assets they may possess which could be used to satisfy the indebtedness. If the LLC is sued and loses the judgment or goes bankrupt, the commercial debt can only be collected from the LLC. The debt can be collected by forced sale of assets located by the tracer, such as buildings and equipment, and garnishment of business accounts.

Individual Purchase for Commercial Use

It is very important for a professional tracer to determine if they are

Date

Skip Tracing Advisor Ron Brown

tracing on consumer debt or commercial debt. Consumers and debt covered under the FDCPA are specifically defined as personal, family or household transactions. Therefore, debts owed by businesses or by individuals for business purposes (commercial debts) are not subject to the FDCPA. There are no U.S. federal laws, similar to the FDCPA, that regulate third-party commercial (business-to-business) debt collection or provide guidelines for the conduct of tracers when working on commercial debt claims. The FDCPA doesn’t cover debts incurred to run a business. A good rule of thumb for a tracer is to look at what the money was used for rather than where it was obtained or the name on the transaction. Here are some common types of consumer purchases which may be classified as commercial debt: • Credit Card Debt - If only certain cards were used for business expenses, this determination will be easy. But it is likely the tracer may need to check statements to determine whether the purchases were for non-consumer purposes. Purchases of business inventory and equipment or cash advances deposited into the business to pay business expenses are not consumer debt. • Mortgages - Mortgages on business property are business debt. A mortgage on property purchased as an investment property to rent out is a business debt. • Car loans - If a vehicle is purchased to use only in business, this is a business debt. If the family car is used to make business sales calls, it is a consumer debt. • Personal Guarantees - Personal guarantees of business debts remain business debts. As it should now be very apparent when tracing on commercial debt, there may be a different set of rules involved. The professional tracer must know the rules if they are to be successful in locating the correct entities or parties responsible for satisfying commercial debt. Ron Brown is a member of the National Association of Fraud Investigators and the author of “MANHUNT: The Book.” Contact him at rbrown2150@aol.com. July/August 2016

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Under One Half of 1% are Actual Credit Card Complaints

ROUTING SLIP Initials

Date

In December 2015, the CFPB issued its first major report on the credit card market since 2013. While the report in 2013 focused largely on the impact of the 2009 Credit Card Accountability Responsibility and Disclosure Act (CARD Act), this report largely examined trends in the consumer financing market but what was most interesting to me was the report’s section analyzing credit card debt collections where I found some interesting statistics. Fred N. Blitt The report noted that for 2014, it had received 88,300 complaints concerning debt collection of which one in seven were related to credit card debt. As we all know, the CFPB ets, the credit card collections amounts to a complaint rate of does not investigate the veracity a vast majority of these claims, 0.0004%. As you can guess, that is not the spin the CFPB put meaning this complaint figure is of dubious value in measuring on the 88,300 figure. What makes that oversight more telling is the conduct of the businesses policed by the CFPB. The statistic that, but for the Federal Reserve report, all of these reports were is of seemingly greater value for CFPB press releases or news cited and footnoted within this 2015 CFPB study. Regarding articles on the dangers of debt the Federal Reserve report, I went collectors. However, if you conwith their more conservative numsider that one in seven number ber, as I found another report that “...since 2009, our industry appears and do some quick arithmetic, claimed 70 million Americans had to have consistently done you get a figure of about 12,500 accounts in collections. complaints regarding credit card While I am on a roll, let’s what it has always done – debt. “So what,” you say. Well, consider more figures. According practiced collection law let me put this in some context, to the CFPB, at the height of the with some numbers found in Great Recession, 2010, nearly 11% ethically, professionally the report and some I uncovered of all accounts were considered and pragmatically.” thanks to Google. charged-off. This tells you that First, consider an August there is an enormous universe of 2014 Federal Reserve Bank of files that would be subject to conNew York report regarding household debt and credit. Accord- sumer collections and therefore subject to the CFPB’s oversight ing to that report, approximately 30 million Americans have at and statistics. Yet, even with that volume, the complaint rate for least one debt in collections. Now, consider that the 2009 FTC credit card accounts is well under 1%. study entitled Collecting Consumer Debts: The Challenges of Now, I understand that the numbers are not a comChange showed a majority of the cases on many state court plete apples to apples comparison. However, given the laserdockets on a given day are debt collection matters. This finding like focus of Congress, the president and regulators on conwas specifically quoted by the CFPB in this report. Couple those sumer debt, particularly with the heavy publicity directed facts with a 2014 Bureau of Labor statistics Report, that showed to credit issuers, debt buyers and collection attorneys since 250,000 people are employed directly by banks to collect debt 2009, our industry appears to have consistently done what it with an additional 130,000 more people devoted to third party has always done – practiced collection law ethically, profescollection. Hence, with nearly 400,000 people servicing 30 mil- sionally and pragmatically. lion delinquent accounts, many of which dominate court dockContinued on page 7

Legal Collection Advisor

July/August 2016

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“...CFPB stated that system can ‘optimize the rate of recovery for issuers which can benefit consumers in terms of decreased cost and increased availability of credit.” Obviously, this is my spin on the facts and figures; the CFPB would never give our industry credit, or would they? They actually do come close! The Report, even though you do have to look hard to find it, actually gets it right when it comes to the business of collections. In commenting on a collection system, which rewards 3rd parties who demonstrate the best collection returns, the CFPB stated that system can “optimize the rate of recovery for issuers which can benefit consumers in terms of decreased cost and increased availability of credit.” Something else caught my eye, again allowing me to reach a conclusion that the regulators would never make. In examining the debt selling practices of credit issuers (and keep in mind this report was compiled prior to any of the major consent decrees) the report noted that credit issuers had provided the CFPB with their account documentation policies and practices. What is revealed was that after 2013, many of the issuers were making warranties as to title, compliance with relevant consumer laws and an affirmative statement as to accuracy and completeness of the information the debt buyer was purchasing. In fact, the report noted that only a minority of the debt sale agreements made no

warranties and none of the agreements made caveat as to accuracy and that most stated the information was materially true and correct. While the report notes this was neither universal nor as far as the CFPB thought they should go, it is a clear sign the industry was working to address concerns before the consent decrees emerged. Our clients and our industry will remain in the crosshairs for the foreseeable future. That being said, what this report shows is we continue to practice ethically and adapt rapidly to change. Moreover, while none of us welcome the scrutiny, it is clear that many of the decrees will only help to reduce the target. With greater amounts of documentation, more robust guarantees from debt sellers, the consumer and the courts can feel confident when we proceed to settle or litigate, our firms commitment to ethical collection will be reinforced by all our partners along every rung of the collection ladder. Fred N. Blitt, Esq., is a partner with Blitt and Gaines, PC in Illinois and Couch, Conville and Blitt in Louisiana. He is past president of NARCA.

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July/August 2016

Back to Letters to Get Attention ROUTING SLIP Initials

Date

“I am Gritkhor, third son of Tibeldar and in charge of the family finances. We have done business with other cave dwellers in our region through the trade of furs, seasonal vegetables and meats from successful hunting excursions. We are a hard-working family and provide much for others. A family in a nearby cave unit has failed to provide payment for the Tyrannosaurus hides we have tanned for them. They no longer appear at their cave Harry A. Strausser III entrance when I pound a stone on the adjoining rocks to summon them. I call loudly into their chambers only to hear silence. Today I take my small stone and slate tablet and leave them a the occasional follow up letter based on the situation. In a world message at the foot of their entrance, ‘Payment due for hides. where consumers just don’t answer their phones, we turn back Please pay immediately. Sincerely, Gritkhor.’ I then walk…” to the written message. Many firms I work with are testing new I awoke suddenly from this crazy dream. I got my shower, letter content and more attention getting presentment of the got dressed and headed to my office at my agency in central mailers. The tone of these mailers has transitioned from the dePennsylvania. Another day in the debt collection industry about mand notice to the let us help you letter. We are a softer, kinder to start. I suddenly realized the genesis of this dream. Our indus- industry in 2016. try has been thrust back into the If you can’t leverage your stone age by regulators with big phone communication as you “Many firms I work with are testing clubs they swing aimlessly. once did, consider reaching out Since the old days of index to your letter vendors and explore new letter content and more attention cards and rotary phones, our world new, creative communication apgetting presentment of the mailers.” has exploded with communication proaches. Many firms are develtechnologies that can assist busioping messages to consumers and nesses and consumers in extraordinary ways. If someone faxes to then tracking the response rate of each new coded notice. Atour office it arrives via email as a PDF document. We have smart tempt to determine the type of message that is most motivating phones that run our lives and communicate by emails hundreds to the demographics of your consumer base. Perhaps alter your of times a day and text messages to save time, especially to our message based on the industry/product you are collecting. Millennial generation. Our culture is light-years ahead of where It was another long day at the office. I’m finally home in we were 50 years ago, but our industry is stuck in the tar pits of my easy chair relaxing with my golden retrievers and getting regulatory confusion. a bit sleepy… “It was a successful day for Gritkhor and there Specifically, we have developed telephone technology that was much rejoicing among his family. His last message via slate manages our calls and enables us to communicate efficiently tablet to the neighboring customers did the trick. When they with thousands of consumers daily…in theory. Our industry la- awoke they found a pile of stone tools and arrows at their cave ments right-party contact ratios that are in the single digits. The entrance. There was also a unique product offering of a round TCPA prohibits our ability to call a consumer’s cell phone with- stone with a hole in the middle through which one could insert a out their express permission (which they can now revoke at any long branch and roll along the ground easily. On the side of this time and in any manner). With this current culture many firms stone was etched the word ‘wheel.’ This family, called Guhdyhave turned their communication focus back to the issuance of eer, was so creative despite the fact they were slow repaying their letters in an attempt to get their message to the consumer. We debts. Imagine the uses for this new item! What in the world will may not use a chisel and stone but it feels that way sometimes. they think of next? Years ago most agencies scheduled a series of notices for We encourage our readers to submit a “best practice” idea each account booked into their system. Postage was cheap and for inclusion in this column. Until next time, I’m in a collection phone contact was expensive and difficult. Imagine trying to office near you! speed dial on a rotary phone! As postage costs have soared we Harry A. Strausser III is president of Remit Corporation Interact have reduced mailings often to just the validation notice with Training & Development. Contact him at harry@remitcorp.com.

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July/August 2016

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July/August 2016

Texting: The Final Frontier? ROUTING SLIP

How are there two extremes when it comes to sending a text message to a debtor? The answer is actually quite simple. There is no answer because the FDCPA does not specifically address text messaging. In 1977, when the FDCPA was passed into law, text messaging and other contemporary forms of communication did not exist. Since then, not only have new methods of communication been introduced but the populationâ&#x20AC;&#x2122;s preference for how they want to be communicated with has changed dramatically. Almost anyone with children can confirm that texting and social media dwarfs communicating over the phone or in person. In fact, we see these same preferences in the younger generation workforce as well. Education aside, how can the agency start sending text messages? There is no law detailing the use of text messages as a method of communication; however there is law regarding how the agency can communicate with the debtor. The same rules in place for communicating via phone calls, letters, and emails need to be followed when sending text messages. If we evaluate this from a technology perspective, agencies are faced with a challenge. Even the newest collection software available does not include a module for text messaging. For now, agencies must partner with an outsider provider to capture the necessary technology to launch a text messaging campaign. Using an outside service provider equals a need for integration. Here are three technology considerations for implementing your text messaging campaign:

1. Consent

As with calling a cell phone or sending an email, you must get consent from the debtor. Yes, this can be achieved over the phone if you actually speak with the debtor but I have seen a more systematic approach. If you are driving the debtor to a payment portal, whether from your own website or through a letter campaign, ask for consent when they log into the portal. Setup the first screen to include a checkbox for consent to receive text messages. Furthermore, if the box is checked, ask for updated contact information. Force the debtor to confirm or update their phone numbers and address information before they can move to the payment portion of the site. I have seen technology offerings like this from several letter vendors and payment processing vendors in the industry.

2. Data Integrity

If the debtor does consent and provides updated demographic information, do not assume it is accurate. You should not be in a hurry to overwrite the primary phone number and address you

Initials

Date

Technology Advisor Sam Edens

have in your collection software just because something newer has been presented. The debtor may consent to receiving text messages and then deceitfully or not, provide a wireless phone number that does not belong to them. Sending a text message to the wrong phone number could mean you have just disclosed the debt to a third party and violated the law. Ask the debtor to respond to an initial text somehow confirming the phone number belongs to them. After passing your integrity checks, update the primary phone and/or address information in your collection software with the newly provided demographic data. However, do not fully delete any previous demographic data. Capture it in a previous record module or in the account notes.

3. Integration

The design and development of the data integration, or interface, will need to be tested and in place before launching your text messaging campaign. Most vendors will offer a batch mode integration. This file-based solution usually involves an overnight file delivery for updates that day. The agency will receive that file and import it into their collection software. An import interface must be built into your collection software. Depending on how many files are delivered or the schema of the files, more than one import interface may be required. The data in your collection software will always be up to 24 hours behind the payment/consent portal because the updates will not be received and processed until later that night. A real-time solution will process updates from the portal as they occur and import the updates into your collection software automatically. For now, sending text messages to debtors remains a gray area. While text specific regulation is being formed, will you wait for others to push ahead and evaluate the fallout or will you implement this modern day, and often preferred, contact method? Sam Edens has been with Emprise Technologies since 2006 and is currently serving as Vice President. Prior to his time with Emprise, Sam designed and developed performance and flow management software for UPS. July/August 2016

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4 SECURITY LEVELS YOU SHOULD UNDERSTAND

BY SARAH MORRIS

f you’re performing collections, you’re no stranger to regulatory compliance and the proactive supervision of government agencies such as the Federal Trade Commission (FTC), Consumer Financial Protection Bureau (CFPB) and the Office for Civil Rights (OCR). It’s also critical to consider how you’re protecting consumer data and understand what information security audits are available and will best fit your organization based on the type of debt you’re collecting. Engaging an independent thirdparty to perform one of these many audits is not necessarily a requirement for collecting debt, but is highly recommended to ensure that the controls you have in

place to protect sensitive data are appropriate and operating effectively. What are the most commonly requested audits? Which audit is right for me? How can I prepare? Whether you’re collecting credit card, medical, student loan or commercial Sarah Morris debt, familiarizing yourself with the alphabet soup of information security audits (SSAE 16, SOC 2, HITRUST, PCI and FISMA) is the best way to begin making sense of the commonly requested frameworks and understand which one is right for you.

SSAE 16/SOC 1 An SSAE 16 (SOC

1), or Statement on Standards for Attestation Engagements No. 16, is the most commonly used framework for U.S. service providers. SSAE 16 reports were primarily designed to report on the controls of a service organization that are relevant to their client’s financial reporting. SSAE 16 engagements are performed solely by CPA’s and intended to aid service organizations in eliminating potential errors to protecting client data and attest to the effectiveness of the controls. There are two types of SSAE 16 (SOC 1) reports, a Type I and a Type II. Similar in the presentation of each control objective, a Type I Continued on page 15

Getting Inside the Heads of Regulators

In April, 2016, I was fortunate to have attended two collection industry functions at which speakers from the Federal Trade Commission and the Consumer Financial Protection Bureau provided their thoughts on enforcement and rule making. These highlights from their presentations are helpful in understanding what to expect from our primary federal regulators going forward. Chris Koegel, assistant director of financial practices at the Federal Trade Commission discussed the FTC’s top enforcement priorities: Debt buying and Operation Collection Protection 1. Debt Buying. While debt sales continue in legitimate forums, the FTC says phantom debt collection causes extreme consumer harm to people who least can afford it and it has a negative effect on the economy. Those who use egregious practices to attempt to collect non-existent debt damage the credit and collection industry and make our jobs harder. These posers possess sensitive information about consumers and the FTC is trying to figure out how they get it. Koegel provided the April, 2015, enforcement action with Cornerstone and Company, LLC, its owner, Brandon Lambert, and a separate action with Bayview Solutions and its owner Aron Tomko, as an example of this initiative. The FTC alleged these debt brokers posted unencrypted documents containing consumers’ private information including credit care and bank account numbers, online and not protected in any way. Enforcement followed the model of data security and data breach cases in which the defendants had to notify affected consumers their information had been exposed, explain to consumers steps they could take to protect themselves, and establish and maintain security programs that must be evaluated every two years by a certified third party. More recently, the FTC in conjunction with Illinois Attorney General Lisa Madigan brought an action in March, 2016, against Chicago companies using the names Stark Law, Stark Recovery and Capital Harris Miller & Associates, among others. The complaint cited violations of the FDCPA, the FTC Act, the Illinois Collection Agency Act, the Illinois Consumer Fraud and Deceptive Business Practices Act, and sought injunctive relief, restitution, refunds, disgorgement of ill-gotten monies, rescission of contracts and other relief. The companies purportedly sought to collect payday loans consumers didn’t owe or they didn’t have the authority to collect, and used false threats of litigation, false threats of criminal prosecution, harassing phone calls both to consumers and third parties, and failure to obtain a license under the Illinois Collection Agency Act. In addition, the action alleges defendants sold bogus debt portfolios. According to Koegel, the lesson here is to pay attention to portfolios you are

ROUTING SLIP Initials

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Compliance Advisor Debra J. Ciskey

offered to buy. If you experience problems with the collection of debts in a portfolio, stop collecting it and do not resell it. 2. Operation Collection Protection. Koegel described Operation Collection Protection as the first federal, state and local sweep of debt collectors. It is designed to stop people who were operating criminally, but also catch legitimate debt collectors who had multiple compliance issues. The partnership between federal, state, and local regulators continues. Koegel reported they have monthly conference calls, and hope to demonstrate improved consistency in enforcement efforts. The FTC wants to work with legitimate members of the industry, and Koegel referenced the FTC’s Debt Collection Dialogues in 2015 as an example of this effort. How does one become a target of the FTC and Operation Collection Protection? A targeting team monitors the following resources and instances to identify potential enforcement targets: 1. The Consumer Sentinel complaint database. Who is amassing a great number of complaints? (This is an older complaint database than the one the CFPB is amassing. It combines complaints from a number of federal and state agencies and the Better Business Bureau. The database is not made public, nor are those complained about notified of complaints or given the opportunity to resolve them.) 2. News stories about the practices of a debt collector. 3. Relative harm to consumers, such as the phantom debt collectors, and the egregiousness of the harm. 4. How many lawsuits have been filed against the debt collector and how do they react to them? 5. Attorney General actions brought against a debt collector, such as assurances of voluntary compliance and consent agreements. 6. BBB complaints and how you respond – the seriousness of the allegations. 7. Consideration of how would the enforcement action meet their strategic requirements at the FTC. Recognizing debt collectors play an important role in July/August 2016

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Ciskey - Continued from page 12 the economy, Koegel explained the FTC is trying to strike a balance between the role of legitimate agencies and consumer protection. Tom Pahl, managing counsel in the Office of Regulations at the CFPB, is head of the team working on the debt collection rules. He discussed: 1. Using rules to deal with debt collection problems. 2. Debt collection is a high priority for rulemaking as a tool. Pahl compared the debt collection rules to the only two tools needed in most households: WD-40 to make things go and duct tape to make things stop. Pahl reminded us the one rule already published related to debt collection is the Large Market Participant (LMP) rule which defines the agencies which will be subject to supervisory examinations by virtue of their size, as demonstrated by their ability to generate revenue in excess of $10 million annually, exclusive of revenue generated by the collection of medical debt. 175 companies are eligible for supervision, which the CFPB calculates represents 60% of the revenue stream in the collection industry. Pahl suggested the CFPB has provided debt collectors plenty of resources they can use to ensure they are in compliance prior to publication of the rules, including its quarterly Supervisory Highlights reports, which the CFBP expects all entities subject to its jurisdiction to read in full while thinking about how advice provided to others in the financial services industry might also apply to our own practices. Its compliance bulletins are also required reading. He referenced in particular the CFPB’s recent bulletin 2015-07 relating to in person collection visits. Pahl compared the enforcement activity of the CFPB—25 debt collection cases involving UDAAP and FDCPA— as small compared to the 50,000 or so private actions brought in recent years. He emphasized the CFPB cases are meant to bring clarity in expectations about how debt collectors should operate and address issues that have not been dealt with before. He reiterated CFPB Director Richard Cordray’s recent public comments that these cases carry the weight of precedent. July/August 2015 www.CollectionAdvisor.com . July/August 2016

Similarly, law enforcement sometimes is expressed in amicus briefs the CFPB files in actions brought by other entities. These provide important insights and should be read by industry. (Briefs can be found on the newly re-designed CFPB website: http://www.consumerfinance. gov/policy-compliance/amicus/ ) Pahl reasoned the high level of consumer complaints shows rules are necessary and should advance rulemaking. The complaints appear to indicate that debt collection ecosystem does not flow well. Rules will address the information needed to substantiate debts, according to Pahl. They will provide options to manage the frequency of communication, and are likely to require increased disclosures related to consumer rights. He revealed the rulemaking team has conducted three debt collection research projects: 1. Surveyed 11,000 consumers, 2,000 of whom responded. They are finishing the analysis of the data. 2. Focus groups on validation notices and other proposed disclosures. They

conducted cognitive interviews with other consumers on the content of sample notices. Pahl intimated that written communications with consumers may need to expand to a second page. 3. User experience testing on the format and design of notices. The costs incurred related to compliance are not unknown to the CFPB, and he said they realize a balance of costs versus information overload are all important considerations. They want to evaluate the effectiveness of their proposed ideas. “Why is it taking so long to publish debt collection rules?” Pahl said he is often asked. His answer has three parts: 1. They had to start from scratch, not revising existing rules. Scratch cakes always take longer than boxed cakes. 2. The rules will cover a wide variety of acts and practices. 3. The vast amount of research they had to do. Debra Ciskey is the Compliance Officer at Wakefield & Associates. Inc. She is a member of the board of directors and a certified instructor for ACA International.

Steps to Collect Credit Card Debt and Remain Compliant

Credit Cards have come a long way over the last 60+ years. Credit cards were originally made out of cardboard or celluloid then eventually replaced by plastic with a magnetic strip. Some added the consumers picture for additional security. They have since instituted features such as key fobs and chips that can be implanted into our electronic devices. The way we attempt to recover debt incurred on credit cards has also changed throughout the years. Almost forty years ago a once unregulated industry was required to follow certain rules under the Fair Debt Collection Practices Act (FDCPA). The FDCPA was designed to eliminate abusive practices and provide consumers with an avenue for obtaining validation of debt information in order to ensure the information’s accuracy. Collectors had to change their approach including the time in which calls were made, ceasing calls upon request, misrepresenting the debt or using deception, harassment, communicating with third parties and any act to be deemed abusive. Agencies not only had to worry about enforcement from the Federal Trade Commission (FTC) but were also subject to predatory lawsuits for alleged violations of the Act. Nearly 33 years after the inception of the FDCPA, the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into federal law. This was followed shortly by the creation of the Consumer Financial Protection Bureau (CFPB). The CFPB prohibits unfair, deceptive and abusive acts or practices (UDAAP) and serves as the primary regulator responsible for enforcing consumer protection laws. So once again, the consumer financial services industry had to change how they conducted business and those who couldn’t or wouldn’t conform would eventually have to close their doors. UDAAP is one of the most vague, amorphous statutes ever written and the CFPB has broad power to prohibit consumer lenders, servicers and other consumer financial service participants from engaging in practices deemed to be unfair, deceptive or abusive. What does this mean for collection agencies? 1. All agencies would need to create a compliance department that regularly monitors calls to ensure their agents don’t intentionally or unintentionally harm consumers. 2. Creditors and servicers must oversee their vendors to ensure compliance which includes monthly, quarterly or yearly audits, weekly, bi-weekly or monthly call calibrations, and weekly or monthly complaint logs. 3. Agencies are required to oversee the vendors they use to ensure

ROUTING SLIP Initials

Date

Agency Advisor Sam Eidson

processes are in place to protect personal consumer information and monitor any consumer complaints received. Now that we’ve covered some of the regulatory requirements collectors must abide by, lets discuss what we can do to recover outstanding credit card debt while remaining compliant. Most creditors require their agencies to complete a series of scrubs (bankruptcy, deceased, military, litigious and cell) and mail the initial dunning letter upon placement. Once the aforementioned steps are complete its time to start making calls. Collectors have to be trained on how to avoid violating the 30-day validation period when communicating with the consumer. 1. While a debt collector may ask a consumer to pay when contacting the consumer within the first thirty days, a debt collector cannot demand the consumer pay in a time frame shorter than the validation period without risking an FDCPA violation. 2. Everything a collector says is now dissected by members of compliance leaving very little margin for error. 3. Collectors must properly identify the consumer, creditor, themselves and the company from where they are calling. 4. Next they must provide the required mini-miranda and two party consent disclosures (if the calls are recorded). 5. After all of that is complete they can attempt to collect the debt by asking the consumer if they can pay the balance in full, settle or work out some sort of payment arrangement. 6. The negotiations that follow are where the majority of potential UDAAP violations can occur. Collectors are no longer incentivized to collect the debt no matter how it’s done. Now they must collect the bill and do so in a way that could not potentially harm a consumer by misrepresenting their clients’ intentions or stating the ways that nonpayment could affect the consumer. I have sat through numerous Continued on page 15 July/August 2016

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“I recommend selecting a SOC 2...if you’re specifically collecting on healthcare accounts. ” Four Types of Security - Continued from page 11 attests to the controls as of a specific date in time, whereas a Type II attests to the controls through a specified period of time, offering a description of the tests performed for each control and the results of the tests. If you’re working directly with a bank, have a client specifically requesting an SSAE 16, or are simply looking for a good place to start, I recommend pursuing an SSAE 16 audit. This could apply if you’re collecting on credit card, medical, student loan, or commercial debt. The SSAE 16, as many audit types do, utilizes

RECOMMENDED SECURITY AUDITS SSAE 16/SOC 1 SOC 2/HITRUST PCI FISMA

a risk-based approach allowing you to identify your areas of risk and determine whether you’re appropriately addressing each risk. The SSAE 16 audit process helps you to design and implement internal control, thusly demonstrating commitment to integrity and ethical values through policy and procedure.

SOC 2 I recommend selecting a SOC 2 audit if your client demands it, prospective clients are requesting, or if you’re specifically collecting on healthcare accounts. A SOC 2 audit, unlike a SOC 1, is prepared in accordance with AT 101, Attest

Credit Card Debt ✓ ✓ ✓

Commercial Debt ✓ ✓

Student Loan Debt ✓ ✓ ✓

Eidson - Continued from page 14 call calibrations where collectors discussed interest rates, late fees, collection costs, credit reports and further collection activity. In the past collectors would attempt to motivate the consumer by explaining how paying the account would improve their financial situation or ability to obtain future credit. Collectors would try and talk consumers out of settlements because if the balance were paid in full it would look better on the consumers’ credit report. They would explain how nonpayment could end up costing the consumer more money with added interest, late fees or collection costs. All of these tactics could mislead, deceive or be unfair to the least sophisticated consumer and that is exactly what regulators prohibit. I can’t think of another industry that is more regulated than collections. Until we come up with a way to collect unpaid debt without ever having to make a call I suggest continual training for those who are directly communicating with consumers. Sam Eidson is the Director of Compliance for Delta Outsource Group, Inc. He also serves on the Board of Directors for the Missouri Collectors Association. .

July/August 2016

Commercial Debt ✓ ✓

Engagements. Similar to a SOC 1, SOC 2 engagements are performed by a licensed CPA. A SOC 2 reports on non-financial controls, focusing on what are known as the Trust Services Principles; security, availability, processing integrity, confidentiality and privacy. Is the system protected against unauthorized access (logical and physical)? Is the system available for operation and use as agreed? Is the system processing complete, accurate, timely, and authorized? Is the information designated as confidential protected as agreed? Is personal information that is collected, used, retained, disclosed, and destroyed in conformity with the entity’s privacy notice commitments? This is what is addressed during a SOC 2 audit engagement. A recommended practice for those working closely with the healthcare industry is undergoing a SOC 2 HITRUST Continued on page 17

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Agency Spotlight

Game for Anything in Credit Card Debt

redit card debt seems to be susceptible to just about any kind of debt collection regulation meaning compliance must be on its A game. This issue of James L. Stewart Collection Advisor shines the Agency Spotlight on Sentry Credit. We talk to James L. Stewart, co-founder, about his credit card collection efforts, how they weathered economic downturn and just what the heck is a pickle ball.

How did you get involved in debt collection? Just like most of us, when we were kids adults would ask us what we wanted to do when we grew up? There was always a kid that said, “I want to be a fireman,” or, “I want to be a policeman.” No one that I ever knew, including myself, said, “I want to be a bill collector.” I was going to college in the mid 80s and was looking for work to help pay for it. In October of 1988, I answered an ad in the newspaper from a local collection agency seeking to train bill collectors. I went to an interview at Continental Credit Services in Kirkland, Washington (now OSI). They had me sit with a collector for about a half hour and observe what they do. I was hooked; I knew this is what I wanted to do!

What is a philosophy that will help an agency weather such downturns in the market? That is an excellent question. I tell you what; it would have been great to have a crystal ball back then. I’ve been in this industry about 29 years and with the way collections used to be, it didn’t matter what was going on with the economy, collections was always good. As for the subprime market, it was a double edge sword that really hurt. Lots and lots of people turned over for collections but folks did not have the money to pay their accounts in full. No matter how much we motivated

BY JOSHUA FLUEGEL

them to borrow money to get settlement they could not come up with it. We seemed to be working about twice as hard to collect about half as much money. Our payroll cost shot through the roof and profit margin dropped dramatically. It was a tough time; I’ve never seen anything like it before. There had to be light of the end of the tunnel but that light seemed to be a train coming at us. We’re just starting to recover. In 2015 we had a profitable year and 2016 is doing well for us. I would advise diversification. We had made such a great name for ourselves in the financial industry serving all aspects of the financial space. All the banks wanted to do business with us for the most part. We had large volume from them so we didn’t get a chance to grow out other divisions of the company such as commercial, insurance subrogation and property management. Those are areas, if I had to do it over again, I would have branched out and diversified the company no matter how much business was coming in. That’s one thing our company has done since.

What is a piece of advice you would offer an agency looking to get into credit card collection? The biggest piece of advice that I could give would be to make sure they invest in a quality, robust, compliance program if they

haven’t already done so. Compliance is so crucial to retaining and protecting your clients and your agency. It seems like it was not too long ago when most accounts receivable management companies did not have a compliance department. Now, we have a chief compliance officer and staff, as well as a quality assurance department helping us adhere to all the new regulations and guidelines put forth by the CFPB and our clients. The second piece of advice that I would highly recommend is making the financial investment in purchasing call analytic software. This investment has paid for itself over and over again, saving us from having to pay out money to unscrupulous consumers and attorneys attempting to bring false legal claims against us and our clients.

What do you enjoy doing in your free time? In my spare time, which I seem to never have enough of, I enjoy spending time with my wife and two boys. We enjoy playing pickle ball in our backyard court in the summer. I am the family pickle ball champion and have been now for many years. My 17-year-old teenage boy plans on taking that title from me this summer…or so he thinks! I use to play basketball so I had a short court. The guy who built the court said, “you need to have a pickle ball court.” I had never heard of pickle ball. He described it and said everyone loves it once they try it. He was right. That’s where pickle ball for me started. I also enjoy playing chess and other games of strategy. Living in Washington state, I am a huge Seahawks fan and I am already looking forward to next football season.

This article is continued on www.collectionadvisor.com.

Sentry Credit staff with James Stewart, upper left, supporting the Seattle Seahawks. July/August 2016

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“You may become ‘PCI Compliant’ by completing a Self-Assessment Questionnaire (SAQ).” Four Types of Security - Continued from page 15 audit. Pairing a SOC 2 with a HITRUST CSF (common security framework) component can help take the guesswork out of HIPAA compliance assessments. The HITRUST framework is a healthcare industry-created compliance protocol designed to address compliance and risk expectations of HIPAA’s Security Rule, variations in business practices, and third-party assurance expectations. Since the SOC 2 is designed to address the aforementioned Trust Services Principles, which are all concepts intrinsic within HIPAA’s Security Rule requirements and the HITRUST framework, it is an incredibly effective report that will provide internal and external value to your organization.

PCI The Payment Card Industry Data

Security Standard (PCI DSS) was jointly developed by the payment card brands to encourage and enhance cardholder data security and to facilitate the broad adoption of consistent data security measures globally. PCI DSS v3.2 is the current version, and applies to any merchant who stores, processes, or transmits cardholder data, and any service provider who stores, processes, or transmits data on behalf of a merchant. As a debt collection agency, you can be either a merchant or a service provider. You’re considered a merchant if you’re accepting credit cards as payment, and a service provider if you’re loading account numbers into your system to collect on. PCI DSS is a robust information security standard with approximately 394 controls, 12 requirements, and organized under six control objectives. If you’re collecting on credit card debt, or accepting or processing payment cards, you must comply with PCI. You may become “PCI Compliant” by completing a Self-Assessment Questionnaire (SAQ). There are nine basic versions (with variations), and can either be signed by a Qualified Security Assessor (QSA) or can be a self-attestation. You may also become “PCI Certified”, and upon completion will receive an official Report on Compliance (RoC) from a QSA. .

July/August 2016

FISMA The Federal Information Secu-

rity Management Act (FISMA) is a U.S. federal law, enacted in 2002, to protect government information and assets from unauthorized access, use, disclosure, disruption, modification, or destruction of information and information systems to protect the three pillars of information security: confidentiality, integrity and availability. FISMA is the law; NIST Special Publication 800-53 is the comprehensive standard that contains the individual security controls required to comply with FISMA. Certification is achieved when an Authorization to Operate (ATO) is signed by a federal agency’s senior management official. If you’re collecting on student loan debt, working with the federal government, a federal contractor, or a sub-service provider of a federal contractor, you are required to meet the National Institute of

Standards and Technology (NIST) 80053 standards. There’s not a cookie cutter approach to determining which information security audit is right for you. The important things to consider are best practice recommendations, who these audit frameworks apply to, and the type of debt you’re collecting. Whether you choose to undergo an information security audit or not, the best place to start is making sense of the alphabet soup. The chart on page 15 will provide a basic breakdown of recommended security audits for each type of debt collection. Sarah Morris is the managing editor at KirkpatrickPrice. She is certified in General Information Security Fundamentals (GIAC GISF) and specializes in keeping organizations up to date on information security and regulatory compliance.

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GROWING WITH YOUR COLLECTION SOFTWARE BY JOSHUA FLUEGEL

he growth of one’s own collection agency is the hope of nearly every collection professional. The right collection software can give a collection professional a boost to make that dream a reality. The challenge is selecting the correct software solution. “Collection software should be able to help any agency’s growth potential by eliminating/reducing compliance issues creating savings on legal isCarl Briganti sues and by designing customizable workflows and strategies

to reduce manpower, letter costs, phone costs and increase revenues,” said Carl Briganti, president of CSS Impact. “Growth can be supported by a number of factors but one characteristic does stand out – responsiveness,” Tony LaMagna, owner of Debt$Net Collection Tony LaMagna Software. “Being agile in offering new services to potential clients can double or triple the accounts being assigned and collected.” Not only does a collection professional’s software need to meet his or her

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immediate needs, but it must also grow with the business eliminating the need for arduous vendor changes. “The key ingredient to rapid and sustainable growth is a solid scalable collection software platform that ties into and controls inbound and outbound call traffic as Jeff Dantzler well as compliance control and monitoring,” said Jeff Dantzler, president at Comtronic Systems. “One of my first instructions in aviation: no matter what the other circumstances are in the cockpit that may distract you, ‘remember to fly the airplane!’ Dan Hornung said Dan Hornung, president at ROYDAN Enterprises. “As agencies grow, remember that you built the company on the culture and values that were there when you were smaller. As solution providers, it is important to build the flexibility into the software solutions to address the dynamic needs as a customer grows.” The ability to add more seats to an agency’s software is only a portion of the agency growth requirements. Agencies grow in different ways and must be allowed to do so without restriction from software. “A collection solution that is tailored to an agency’s specific needs not only increases efficiencies within the organization, but also creates an environment based R. Fred Houston around compliance, growth and flexibility in an ever-changing marketplace,” said R. Fred Houston, president and CEO at Columbia Ultimate. July/August 2016

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Continued from page 18 “As agencies expand, collection software must adapt as well. Collection software is an integral part in any agency’s growth model.” “Collection software should enable you to manage your workflow, from entering a single account to importing thousands of Fritz Schulze accounts, all the way to automated statement generation,” said Fritz Schulze, president of Comtech Systems. “Collection software should also be configurable to the way you run your business; you shouldn’t have to alter your business procedures to meet the needs of the software.” The capability of software has grown dramatically in the last decade. With the growth of an agency and profit should come the consideration of additional functionality to enhance day-to-day activity. Intimate understanding of the functionality is a must as well. “Real-time tracking of a client’s value and expenses allows you to focus your business in the most profitable areas,” said Dax Nelson, VP of customer Dax Nelson success at DAKCS. “Monitoring the

MID-RANGE COLLECTION PRODUCTS Ajility Beam Software Beyond ARM Bloodhound Collect! CollectOne DebtMaster Debt$NetPrestige IXP/HD2.0 Lariat RMEx .

July/August 2016

costs and assessing the risks on business operations within the software leads to profit maximization.” James Dunlap, CEO at Lariat Software focused on the cloud. He posed three questions: “Is the cloud safe? Is the back office safe? What hapJames Dunlap pens if the company you worked with in the cloud is suddenly gone?” Dunlap said cloud vendors should, “put source code in escrow, provide daily or weekly backups and utilize SSAE16 servers like Amazon.com.” Having an agency’s software work harmoniously with the collection staff is the final piece of the puzzle. “A core requirement Debbie Collins for scaling beyond 100 people is a commitment to hire and retain the highest caliber of staff,” said Debbie Collins, COO at Quantrax Corporation. “The problems you face with 500 people are not the problems you face with 50.” “An agency can be more productive by using collection software to simply work more accounts, that’s true,” said Thomas Mohr, CEO of Beam Software. “But usThomas Mohr ing collection software to identify which agent is best suited to contact a particular type of consumer based on age, gender, or even the type of debt the consumer has incurred is much better.” “One of the most significant areas of importance in growing an agency involves the collection staff,” said Jefferson K. Kim, president of CDS Software. “Since collectors are probably Jefferson K. Kim the biggest expense of most collection agencies, it is important that every aspect of the collector’s working environment is maximized for productivity, including software that allows for hot keys, pre-defined action codes (instead of typing every note), and quick access to relevant information.”

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MID-RANGE COLLECTION COMPARISON CHART Columbia Ultimate

Beam Software

DAKCS Software

ROYDAN Comtech Enterprises Systems

The CDS Comtronic Software Systems Computer Manager

Ajility

Beam Software

Beyond ARM

Bloodhound

Collect!

CollectOne DebtMaster Debt$Net Prestige IXP/HD2.0

Automated workflow strategy tools

Yes

Recommends goals and scripts for collection calls

Yes

Collection tasks recorded automatically

Yes

Generates customizable correspondence on demand

Yes

Automated letters by client w/ flexible triggers

Yes

Offers automated faxing

Yes

Integrates with email

Yes

Offers automated phone dialing

Yes

Monitors individual collector performance

Yes

Import debtor data w/out custom programming

Yes

Designs custom reports on operator level

Yes

Online, real-time coaching

COMPANY NAME GENERAL FUNCTIONALITY

CSS Impact

Lariat Quantrax Software Corporation Lariat

RMEx

Yes

Access vendor services automatically

Yes

Multiple location and database functionality

Yes

Goals feedback in real-time

Yes

GUI environment

Yes

Secure/customizable remote Web access for collectors

Yes

Secure/customizable remote Web access for debtors

Yes

Secure/customizable remote Web access for clients

Yes

Generate individual status reports for linked accounts

Yes

Application development studio

Yes

Integration with Crystal Reports

Yes

Ajility

Beam Software

Beyond ARM

Bloodhound

Collect!

Lariat

RMEx

Pre charge-off collections

Yes

Post charge-off recovery

Yes

Agency/Attorney management

Yes

Asset sales

Yes

Metro2 reporting on post charge-off

Yes

Standard agency/attorney/buyer formats

Yes

Recovery management statistics and reports

Yes

Automated file processing

Yes

Repossession tracking

Yes

Bankruptcy/Deceased management

Yes

Work by account centric

Yes

Work by person centric

Yes

Ajility

Beam Software

Beyond ARM

Bloodhound

Collect!

Lariat

RMEx

Disputes/Deduction codes can be assigned

Yes

Identifies and tracks problem invoices

Yes

N/A

Yes

Coded problems separate from receivables

Yes

N/A

Yes

Offers customer-level notes

Yes

Offers invoice-level notes

Yes

Electronically reproduces/transmits invoices

Yes

RECOVERY FUNCTIONALITY

PRE-CHARGE OFF FUNCTIONALITY

CollectOne DebtMaster Debt$Net Prestige IXP/HD2.0

All systems permit related accounts viewed simultaneously, customized formatting of statements, set up clients as either gross or net remittance, statements can be regenerated for a specific period, tracks multiple internal and external contact names/numbers, collector alerts, user-definable collector/user interface, user-defined account matching criteria,user-defined balance buckets, user-defined payment types, configurable account flow, ability to extend the account and related tables, prioritized work queues, work grouped by time zone and collection stage, sub-clients for a master client/consolidated statement, relate accounts across clients or sub-clients and user-definable client access interfaces.

Information on this table is derived from information posted on the Internet and direct questions. The company is the ultimate source and should be contacted directly.

July/August 2016

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INNOVATIVE LETTER SOLUTIONS INCREASE PAYMENTS

BY JOSHUA FLUEGEL

here have been shifts in the fundamentals of mailing. These shifts have provided space in the collection industry for experimentation, which could potentially lead to more payments. The experiments have lead to technological innovation as well as simple observations that can make big waves. One of the welcome fundamental shifts has been in the price of postage. “I am not sure I can ever recall seeing a decrease in postage, but in 2016 USPS had to remove the exigent surcharge pricing giving us a 4.3% average reducChristian Kropac tion in postage cost,” said Christian Kropac, president of PCI Group. “Now is the time to reinvest this cost savings back into your letter communication with your customer and take advantage of some of the mail service features that can help maximize your return in your letter strategy.” The change in postage will hopefully lead to time to research alternative methods of creating and distributing mail. One such adjustment could be changing the location of letter printing to better suit a letter campaign’s needs. “To combat declining USPS delivery speed, receivables management organizations should consider nationwide, multi-facility production networks which enTim Schriner able printed communication to be created at the point closest to the consumer,” said Tim Schriner, CEO of RevSpring. “Common sense dictates that consumers will receive documents more quickly if the communication is inserted into the USPS mail stream in the same region as the consumer.” .

July/August 2016

The years of observing trends in mail appearance has perhaps made consumers wary of particular markings. This makes the outside of a mail piece crucial as it delivers the first impression delivered to the consumer. Therefore every mark must be rethought. “Over the past few years a shift has taken place in the way postage is displayed on envelopes. Since stamps aren’t a viable option, the way it is displayed is Kevin Gaffer called a meter mark or a preprinted Indicia box,” said Kevin Gaffer, CEO of Renkim. “It is important to note, that one of the first items a consumer sees on the outside of the envelope is the postage mark in the upper right hand corner. Consumers view a meter mark as an important, more legal looking document…The meter mark heightens the awareness of consumers and debtors that the contents inside the envelope are important and mission critical.” According to Gaffer, “an indicia in the consumer’s eyes looks more like advertising or junk mail and is less likely to be opened. The meter mark has a higher open rate, which hopefully leads to more calls to liquidate the account.” As everyone’s world has grown more and more digital, creating a link between a letter and a consumer’s digital world is a frontier vigorously explored recently. “Making letters easy to understand for debtors and removing roadblocks to payment are an ongoing struggle for collectors,” said Thomas McGahey, president of High Cotton. “We all know that debtors are, on average, receiving late notices and collection letters from five other billers. The best way to win the payer’s attention (and wallet) is to provide the most convenient payment options.

“One of the most effective ways to do so is to encourage what we call “paper-to-payment,” where the debtor can easily make a mobile payment the first time he touches the document. Thomas McGahey QR codes allow the debtor to quickly validate and pay on their mobile phone without going through an extensive and frustrating data entry process.” Gone are the days of putting a letter in the mail and guessing when a payment may come back. A shift in mail tracking can now provide collection professionals feedback on the progression of the letter and the payment through the system. “Another emerging tactic is tracking not only outbound mail, but also the remittance,” said Don Landrum, CEO of SourceLink. “By integrating inbound mail tracking Don Landrum with BREs (business Reply envelopes) collectors can actually see if a payment is headed back in the mail, thus negating the need for a premature email or phone call follow-up. Inbound mail tracking can also help account for cash flow needs and staffing costs. Furthermore, inbound mail tracking can make post-mailing analysis a breeze, as information can be arranged in a convenient dashboard or spreadsheet. Utilizing the upcoming USPS transition to “informed visibility” combined with inbound mail tracking allows you the opportunity to get nearly real-time monitoring of all of your collections activity.” Innovations in mail entry, envelope markings, payments and tracking have made letters evermore useful in compliant collection strategies.

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July/August 2016 Volume 16, No. 4 Editor T. Steel Rose, CPA, ACG editor@collectionadvisor.com Managing Editor Joshua Fluegel josh@collectionadvisor.com Publisher Angie Rose angie@collectionadvisor.com Production Andrea Bergeron Paul andrea@collectionadvisor.com The opinions given by contributing authors are their own and are not necessarily the opinion of our staff and management. All trademarks used are the property of their respective owner.

Collection Advisor (ISSN# 1556-0813) is produced six times a year by Abide Media, P.O. Box 92342, Southlake, TX 76092, 888-610-1144. Standard Mail postage paid at Sussex, WI 53089. ©2016 All Rights Reserved Magazine Publishing Group, Inc. Printed in the U.S.A.

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CDS Software CollectOne Minimize costs. Maximize results. collectone.com info@collectone.com A CDS Software Solution 888-816-3333 CollectOne is an award winning suite of debt collection solutions that provides a feature-rich set of automated business processes designed to minimize costs and maximize results. Collection Solutions Software, Inc. CSS IMPACT! HD™ 2.0 cssimpact.com | carlb@cssimpact.com 877-277-4621

CSS IMPACT! HD™ 2.0 (Enterprise), the industry’s leading ARM | Collections & Compliance Platform delivering decades of deep rooted industry acumen for the ARM, Collections & Compliance sectors. IXP (Lite) also available.

Comtech Systems Collect! Credit and Debt Collection Software collect.org | info@collect.org 800-661-6722 Collect! combines ease of use with total integration of functions. Accounts are efficiently tracked from the time you receive them until activity is concluded and they are closed. Collect! keeps track of critical information automatically. Total integration provides for seamless and accurate month end invoices and statements with full account histories.

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Collection Software continued Comtronic Systems® Debtmaster debtmaster.com sales@comtronic.com 800-414-2814 For 35 years, Comtronic Systems® has delivered the industry’s most complete collections solution, from collector workflow management with Debtmaster to integrated collections telephone with CallThru®. DAKCS Software Systems Beyond ARM dakcs.com sales@dakcs.com 800-873-2527 For over 35 years, DAKCS Software has remained an industry leader in simplifying the process of accounts receivable management and debt collection software by creating integrated, innovative cloud and onpremise solutions. By leveraging our powerful Beyond ARM and QwikSolve | Enterprise Suite software applications, DAKCS provides the necessary tools designed for success in the ARM industry. Quantrax Corporation Inc. RMEx quantrax.com 301-657-2084 | marketing@quantrax.com Quantrax is a high-end collection technology company that has marketed and supported an intelligent collection software platform for over 25 years.

Compliance LexisNexis® Risk Solutions LexisNexis ® Accurint ® for Collections lexisnexis.com/risk/receivables-management 866-528-0780 LexisNexis collections solutions assist debt recovery professionals with increasing workflow efficiencies, greater insight into debt portfolios, collecting more in less time and achieving greater profitability.

Cornerstone Support State Licensing and E&O Insurance cornerstonesupport.com info@cornerstonesupport.com 888-445-8660 Cornerstone Support is the premier licensing and insurance provider to the collection industry; professionally trained to assist you with all of your state licensing needs.

Skip Tracing IDI, Inc. idiCORE ididata.com sales@ididata.com 855-842-1410 Trusted for over a decade by collection agencies and collection attorneys. IDI provides fast, accurate and cost-effective consumer verification and skip-tracing solutions via online, API, and batch processing. Reduce Cost, Not Quality.

VoApps LexisNexis® Risk DirectDrop Voicemail Solutions voapps.com LexisNexis® sales@voapps.com Accurint ® for Collections 855-737-1596 lexisnexis.com/risk/receivables-management VoApp’s patented DirectDrop Voicemail service delivers 866-528-0780 a voice message directly to a consumer’s voicemail LexisNexis collections solutions assist debt recovery server – without calling the phone in question. professionals with increasing workflow efficiencies, greater insight into debt portfolios, collecting more in less time and achieving greater profitability. Electronic Payments

LocateSmarter Advanced Payment Batch & Online Systems Skip Tracing Platform Credit Card & Check locatesmarter.com Processing Merchant Services info@locatesmarter.com apsofga.com 888-254-5501 jennifer@apsofga.com LocateSmarter is a data provider focused on innovation 800-482-4561 and data quality. LocateSmarter offers skip tracing APS provides a full range of electronic payment products such as phone append, bankruptcy, deceased, solutions, including credit, debit & HSA cards, check, cell phone scrubs and more. and ACH transactions, along with multiple software integration options, web payment portals, and the MicroBilt IKEY Product Suite with the attorney endorsed Reg E MicroBilt compliance solution. Collections Suite microbilt.com EFT Network, Inc. 800-884-4747 TxtaCheck MicroBilt is the leading data provider for collections, eftnetwork.com skip tracing and provides multiple alternative and 800-492-2794 collections-specific credit reports, as well as bank EFT Network has launched the industry’s first account data. electronic payment strategy that does not require underwriting or risk. Contact for more information PDJ Services about TxtaCheck. Covert Record Retrieval Mail Services pdjservices.com | contact@pdjservices.com 800-298-1153 RevSpring We specialize in Telephone, Cellular, Nationwide Bank Receivables, & Verified Current Employment Locates. When you Communications want 100% verified accurate information for unlisted & Payments & cellular phones, people locates, bank & employment revspringinc.com locates...you’ll call us!! 248-567-7300 RevSpring’s communication and online payment technology tools include secure document creation, VeriFacts Payroll Promise analytics, text messaging, mobile, and more. RevSpring maintains rigorous compliance programs verifactsinc.com sclark@verifactsinc.com and security certifications. 800-542-7434 Payroll Promise is designed to support a legal strategy by locating verified full time places of employment. The information returned is 100% guaranteed to be accurate.

LISTINGS AVAILABLE | 888-610-1144 1 issue - $500 | 2-6 Issues - $300 ea. .

July/August 2016

INTRODUCING

Collection Compliance Education According to Collection Advisorâ&#x20AC;&#x2122;s 2015 Reader Survey, 85% of readers requested training courses with quizzes for updates on compliant collection practices. This issue will be launching the Collection Compliance Education (CCE) program.

CERTIFIC

ATE OF C O

MPLETIO This certific ate is presen The following quiz covers compliance informaN ted to John Doe tion presented in this issue of Collection Advisor. for successf July-August ully completing Colle 2016 Continu ct ing Complia ion Advisorâ&#x20AC;&#x2122;s Verify that you have completed the 3-hour study time rence Education Course quirement by completing and submitting the following quiz to Collection Advisor. Assuming a passing score of 70%, you will receive a certificate displaying your commitment to continuing your education in compliant debt collection. Upon the completion of 18 credit hours of study (6 passed quizzes) the collection professional will be recognized as a Compliant Collector Silver. Additional increments of 18 hours will be met with further distinction. Course Nu

Instructional

Total CCE Cred

mber: 2016

July 5, 201

delivery me

thod: Self-st

udy

3 credits

Collection Adv

isor / P.O. Box 923

42 / Southla ke, TX

76092

Joshua Fluegel,

Administrator

The cost of the quiz is $25. If a passing score of 70% is achieved, a certificate will sent to the email address indicated. A completed answer sheet can be submitted by email (josh@collectionadvisor.com), fax (817-756-7252) or by mail (PO Box 92342, Southlake, TX 76092).

July/August 2016

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■

CONTINUING COMPLIANCE EDUCATION FOR COLLECTION PROFESSIONALS

1. What restriction does the Fair Debt Collection Practices Act (FDCPA) place on communicating with a consumer via text message? A. Text message communication with a consumer is allowed with expressed consent. B. A consumer can be sent text messages until full payment or a request to stop is received. C. The FDCPA does not address text messaging. D. Text messaging is permitted so long as the primary contact phone number provided by the consumer is a text message-enabled cell phone. 2. Which of the following kinds of debt are not subject to the Fair Debt Collection Practices Act (FDCPA)? A. Business B. Personal C. Family D. Household transaction 3. Which of the following is not a compliance-ensuring activity required by the CFPB? A. Creditors and servicers must oversee vendors through regular audits. B. Agencies must have weekly documented meetings in person or via conference call. C. Agencies must oversee the vendors to ensure processes are in place to protect personal consumer information. D. All of the above are required to ensure compliance. 4. A debt collector cannot demand a consumer pay in a time frame shorter than the ____-day validation period without risking an FDCPA violation. A. 25 B. 30 C. 35 D. 42 5. Which of the following must be provided to the consumer if a call is being recorded? A. Mini-miranda B. Two party consent disclosure C. Data security certifications D. Call back information

July/August 2016

6. Which of the following is not necessarily information that can be derived from incorporation documents? A. Names of the incorporators B. Names of beneficiaries C. Names of the shareholders D. Name of the legal service agent 7. At what point can a limited liability corporation be approached as individual with commercial debt? A. If an individual uses the LLC to pay for personal expenses. B. If it does not maintain LLC paperwork. C. If LLC bills are paid out of a personal account. D. All of the above. 8. Which of the following may qualify as consumer debt, not a commercial debt? A. Car loan for a family car that is used to make business sales calls. B. A consumer’s credit card used only for business equipment or cash advances deposited into a business. C. Personal guarantees of business debts. D. A mortgage on property purchased as an investment property to rent out. 9. An agency collecting student loan debt is required to meet what standard(s)? A. Statement on Standards for Attestation Engagements No. 16 B. Service Organization Control 2 C. National Institute of Standards and Technology D. Payment Card Industry Data Security Standard 10. Which of the following is not a recommended security audit for an agency collecting only credit card debt? A. SSAE 16 B. SOC 2 C. PCI D. FISMA 11. Which of the following is not a recommended security audit for an agency collecting only student loan debt? A. SSAE 16

3 $25 forCredits

B. SOC 2 C. PCI D. FISMA 12. What was jointly developed by the payment card brands to encourage and enhance bank card holder data security and to facilitate the broad adoption of consistent data security measures globally? A. FISMA B. PCI DSS C. SOC 2 D. HIPAA 13. According to Chris Koegel, assistant director of financial practices at the Federal Trade Commission, if an agency is experiencing problems with the collection of debts in a purchased portfolio, an agency should: A. Stop collecting on it and not resell it. B. Run a scrub on the contact info and run it back through the collection process. C. Report to credit agencies accordingly. D. Warn the appropriate debtors of the effect the unpaid debt will have on their credit score. 14. Which of the following is not one of the described resources the Federal Trade Commission monitors to target agencies as part of Operation Collection Protection? A. News stories about the practices of a debt collector. B. How many lawsuits have been filed against the debt collector and how do they react to them? C. BBB complaints and how an agency responds – the seriousness of the allegations. D. The number of letters sent out by an agency. 15. How much revenue does a collection agency have to generate to be considered a Large Market participant, barring medical debt revenue? A. 5 million B. 6 million C. 8 million D. 10 million

Answer the 15 questions and complete the answer sheet on page 28. 27

for 3 $25 Credits

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KEEP CURRENT AND ACQUIRE KNOWLEDGE FOR COMPLIANT COLLECTIONS

Continued from page 27

Course title: July/August 2016

Mark your answers here. Fax this page to: 817-756-7252 1. A ❍ B ❍ C ❍ D ❍ 2. A ❍ B ❍ C ❍ D ❍ 3. A ❍ B ❍ C ❍ D ❍ 4. A ❍ B ❍ C ❍ D ❍ 5. A ❍ B ❍ C ❍ D ❍ 6. A ❍ B ❍ C ❍ D ❍ 7. A ❍ B ❍ C ❍ D ❍ 8. A ❍ B ❍ C ❍ D ❍ 9. A ❍ B ❍ C ❍ D ❍ 10. A ❍ B ❍ C ❍ D ❍ 11. A ❍ B ❍ C ❍ D ❍ 12. A ❍ B ❍ C ❍ D ❍ 13. A ❍ B ❍ C ❍ D ❍ 14. A ❍ B ❍ C ❍ D ❍

YOU READ IT... NOW GET CREDIT

15. A ❍ B ❍ C ❍ D ❍ Total due: $25 for 3 hours of Continuing Compliance Education. Fax this page to 817-756-7252, and if preferred, call 888-610-1144 to follow up with credit card number. If paying by check, payee is: Collection Advisor magazine. Mail to: Collection Advisor magazine, P.O. Box 92342, Southlake, TX 76092. Name Company/Firm Street address City/state/zip Email (required)

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Name on card By signing here, I submit this quiz for CCE credit confirming that I personally studied the material for the required amount of time listed on the exam.

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July/August 2016

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