Grand Rapids, MI – The following statistics are provided to the ARM industry courtesy of WebRecon LLC: FDCPA and Other Consumer Rights Lawsuit Statistics, June 1-15, 2010.

There were about 503 lawsuits filed under consumer statutes in the first half of June.

Here is an approximate breakdown:

• 419 Fair Debt Collection Practices Act
• 47 Fair Credit Reporting Act
• 5 Telephone Consumer Protection Act
• 17 Truth In Lending Act
• 2 Equal Credit Opportunity Act
• 3 Electronic Fund Transfers Act
• 1 Federal Trade Commission Act
• 2 Homeowners Loan Act
• 2 Home Ownership And Equity Protection Act
• 5 State of California Consumer Statutes
• 1 State of Florida Consumer Statutes
• 2 State of Illinois Consumer Statutes
• 1 State of Maryland Consumer Statutes
• 1 State of Michigan Consumer Statutes
• 1 State of North Carolina Consumer Statutes
• 2 State of West Virginia Consumer Statutes
• 6 Real Estate Settlement Procedures Act
• 1 Right to Financial Privacy Act
• 1 Racketeer Influenced and Corrupt Organizations Act

Summary:

• Of those cases, there were about 577 unique plaintiffs (including multiple plaintiffs in one suit)
• Of those plaintiffs, about 182 had sued under consumer statutes before
• Combined, those 182 plaintiffs have filed about 1042 lawsuits since 2001
• Actions were filed in 106 different US District Court branches
• About 541 different collection firms and creditors were sued

The top courts where lawsuits were filed:

• 35 Lawsuits: Illinois Northern District Court - Chicago
• 25 Lawsuits: California Central District Court - Western Division - Los Angeles
• 24 Lawsuits: Colorado District Court - Denver
• 20 Lawsuits: Pennsylvania Eastern District Court - Philadelphia
• 19 Lawsuits: Florida Southern District Court - Fort Lauderdale
• 16 Lawsuits: Georgia Northern District Court - Atlanta
• 16 Lawsuits: Minnesota District Court - DMN
• 16 Lawsuits: Connecticut District Court - New Haven
• 13 Lawsuits: New York Eastern District Court - Brooklyn
• 13 Lawsuits: Maryland District Court - Baltimore

The most active consumer attorneys were:

• Representing 25 Consumers: Sergei Lemberg
• Representing 21 Consumers: Donald A. Yarbrough
• Representing 15 Consumers: Brent F. Vullings
• Representing 14 Consumers: Mark H. Rephen
• Representing 12 Consumers: David Michael Larson
• Representing 12 Consumers: Forrest E. Mays
• Representing 11 Consumers: Daniel S. Blinn
• Representing 10 Consumers: David M. Marco
• Representing 10 Consumers: Lara Ruth Shapiro
• Representing 10 Consumers: Jody B. Burton

Statistics Year to Date: 5306 total lawsuits for 2010, including:

• 4518 FDCPA
• 466 FCRA
• 21 TCPA
• 189 TILA (Truth in Lending Act)

Number of unique Plaintiffs: 5234 (including multiple plaintiffs in one suit)

The most active consumer attorneys of the year:

• Representing 172 Consumers: Sergei Lemberg
• Representing 159 Consumers: Brent F. Vullings
• Representing 132 Consumers: David Michael Larson
• Representing 125 Consumers: Ryan Scott Lee
• Representing 115 Consumers: Todd Michael Friedman

About WebRecon LLC
Creditors and collection firms use WebRecon’s services to easily segregate predictably litigious consumers from their databases. A significant percentage of consumer litigation is initiated by the same consumers over and over again, and screening them out of the general population can reduce lawsuits by as much as a third.

For more information, please contact:

Jack Gordon, CEO
WebRecon LLC, The FDCPA Litigant Alert
Web: www.WebRecon.com
Email: admin@webrecon.net
Phone: (616) 682-5327

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The office of West Virginia Attorney General Darrell McGraw announced Thursday that it has filed lawsuits against two accounts receivable management companies, including one of the largest debt purchasers in the U.S.

In a press release issued by his office, McGraw said that Cavalry Portfolio Services, based in Hawthorne, N.Y., and Seattle Service Bureau, Inc. of Shoreline, Wash., which does business as National Service Bureau, were not licensed to collect debt in West Virginia and did not cooperate with an investigation, prompting the lawsuits.

The release said that Cavalry, one of the largest debt buyers in the country, purchased an unknown number of charged-off credit card accounts and filed numerous suits in West Virginia without a license to collect the debts as required by state tax department regulations. McGraw did not name any other alleged violations of law and did not disclose what relief his lawsuit is seeking.

But Cavalry tells a completely different story.

In a statement issued to insideARM.com, the company said that it disputes the accuracy of statements made in McGraw’s announcement.

“We maintain all licenses required by law to collect debt in West Virginia and all other states, and we operate in West Virginia in a legal and appropriate manner,” the company said. “Cavalry cooperated fully with the Attorney General’s office, and responded in a timely way, through counsel, to the subpoenas. Cavalry plans to vigorously defend itself against these allegations.”

Cavalry noted that it had not seen the attorney general’s complaint, so it did not know the full scope of the allegations, only what was included in the press announcement.

Cavalry said that since 2002, it has purchased more than $20 billion in face value consumer debt and operates nationally from five locations.

McGraw also alleged that debt collection agency National Service Bureau, in addition to being unlicensed in West Virginia, “added illegal interest, collection fees and other charges to debts allegedly owed by West Virginia consumers.” But the announcement does not specify any other collection abuses or violations.

The AG’s office claims that NSB also did not cooperate with an investigation. The announcement does not specify any relief sought by the AG in his lawsuit against the firm.

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Vancourver, Wash. — Columbia Ultimate, an expert in technology and integrated solutions for the collection industry, is pleased to announce that President and CEO R. Fred Houston has been selected to receive the 2009-2010 Association of Credit and Collection Professionals International Affiliate Member Award of Excellence. The award is designed to recognize an ACA International Affiliate member who best exemplifies leadership qualities and dedication to the credit and collection industry.

The award will be presented to Houston during the 71st Annual ACA Convention on July 13, 2010 in Washington, DC. A committee comprised of credit and collection industry members named this year’s ACA Conference Award winners. Houston was chosen for his commitment to the ACA committee and for his dedication to educating others through his insightful presentations at ACA conventions and meetings.

“It’s an honor to be recognized by the ACA and by my peers and I’m proud to be a part of an organization that does so much to support collection professionals and strengthens the collection industry,” says Houston.

About ACA International
ACA International, the Association of Credit and Collection Professionals, is the comprehensive, knowledge-based resource for success in the credit and collection industry. Founded in 1939, ACA brings together more than 5,000 members worldwide, including third-party collection agencies, asset buyers, attorneys, creditors and vendor affiliates. The association establishes ethical standards; produces a wide variety of products, services and publications; and articulates the value of the credit and collection industry to businesses, policymakers and consumers.

About Columbia Ultimate
Columbia Ultimate is an expert in delivering integrated technology solutions and services for enhancing business intelligence, maximizing performance and profitability for the collection industry. Since 1979, the company has led ongoing innovation in debt collection software technology delivering results-oriented offerings that empower organizations to effectively manage and address new and growing challenges in an ever-increasing competitive collection environment. Today, collection agencies, banks, healthcare and retail organizations, along with state, county and local governments across the country rely on Columbia Ultimate for their collection needs. Columbia Ultimate is privately held with headquarters in Vancouver, Wash. More information is available at www.columbiaultimate.com. 

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I am often asked, “What does your company, Snowfly, do?“ I always respond, “We build on-line Casinos so employees can play games at work.” This always elicits the desired look of shock and disbelief. Then, when I list a name of well known corporate users, the questioner realizes I am serious and they ask, “How does it work?” The next response is invariably, “Wow, what a great concept! Where did you get the idea for letting people play games at work?”

The workplace game concept came from two sources. First there was the referred academic study I read while completing my doctoral dissertation. It was by Ed Pedalino and Victor Gamboa, who convinced a manufacturing company to reward good attendance with the opportunity to play a poker game for cash prizes. In the experimental group, each day employees came to work on time, they were allowed to choose a card from a deck of playing cards. At the end of the week, the highest poker hand won $20. Compared to the control group, this group showed a significant and long-term decrease in absenteeism; they out-performed the control group counterparts by 18 percent. The researcher had implemented a game at work and was using the behavior management principle of intermittent reinforcement.

I was intrigued by the implications of this study and wanted to try to replicate it in a real workplace. At the time, I was doing some consulting work for the sanitation department of the city of Garland, Texas. They were having major attendance problems; absenteeism was particularly high on Mondays. My immediate plan was to buy a slot machine (to automate the process) and let the drivers take a pull for on-time attendance. I planned to give them two pulls on Monday. I was very excited by this project, but I ran into a brick wall when I checked with the local sheriff to be sure this would be legal. Twenty-five years later, I can still hear his deep, twangy voice saying, “Buddy, if you put a slot machine anywhere in my county, I’m gonna put you and everybody else who is involved in my jail.”

I really wanted to use the slot machine, but time in the slammer was not an experience I wanted to have. Using the research model of Pedalino and Gamboa, I developed a poker game that incorporated many of the same principles of playing the slot machine. I organized the truck drivers into teams. Each member of the team who made it to work on time was allowed to immediately go to the supervisor’s desk and draw a card from a deck. This simple act ensured that the supervisor recognized the positive behavior of on-time attendance. The card was then posted on a large chart in the break area. I began each weekly game on Tuesday. Drivers who made it to work on time on Monday (high absentee day) were allowed to draw two cards. There were individual as well as team prizes.

The results were dramatic. Attendance improved by 18 percent, and the attendance rate for Mondays was soon the same as for the other days. I heard of one occasion where team members went to a co-worker’s house early one Monday morning and physically pulled him out of bed to increase their chances of winning the jackpot.

Admittedly, this was a cumbersome approach to workplace performance reward games, but it was effective. Today, with Internet capabilities, this type of game is infinitely easier to implement and administer. It has also been cleared by several state Attorneys General who have said this process is not a legal problem as long as nothing is at risk to the employee and they can only win and cannot replay their winnings and potentially lose them. It is, in effect, a process that delivers the excitement of a slot machine without the negative sensation of losing.

Lightning bolt:
My experience with the sanitation drivers led me to think about the premise of playing performance reward games and having fun. Performance reward games are, by definition, fun, and I wanted to figure out how to integrate this aspect into work, many of which are inherently repetitious and boring. Then I had a defining experience, another parting of the clouds, when I realized that repetition and boredom are not necessarily one and the same. Las Vegas knew that all along.

I was waiting for a friend in front of a casino in Elko, Nevada. While I was standing there, a large tour bus pulled up. Almost before it could completely open its doors, 40 senior citizens poured out of the bus and ran into the lobby. I had to move out of the way or be trampled. The men and women scooted like teenagers past the restrooms and the buffet. They made a beeline for the cashier’s cage to buy big bags of tokens for the slot machines.

That’s when it hit me -- pulling a lever on a slot machine is a very routine and repetitive task. If playing a slot machine were a job, it would be difficult to staff it at almost any reasonable wage. Yet these people were paying money to do it.

This began the process for me of figuring out how to incorporate the power of intermittent reinforcement games in the workplace. Surely, if people were willing to pay to pull a lever for hours at a time in a casino, there must be some way to incorporate that same power into our jobs.

About Dr. Brooks Mitchell
Dr. Brooks Mitchell is a Professor of Management at the University of Wyoming and the founder of two highly successful Wyoming-based software companies. When he founded his first company, Aspen Tree Software, he originated the Computerized Employment Interview and was a pioneer in the Internet job application process. In 1999, he started Snowfly. He now devotes his full-time efforts to Snowfly, his students and his classes at the University of Wyoming. Dr. Mitchell is the author of several books and articles concerning employee selection and motivation. His latest book is titled “Games, Work and Human Motivation.” He has been featured in over 75 national publications including Forbes, Wall Street Journal, Fortune, The New York Times and U.S.A. Today. He is a frequent quest on talk shows including recent appearances on CNBC and the Executive Forum. Brooks spends his free time enjoying life, whether it is on the golf course or the trout stream.

About Snowfly
Snowfly is the leading provider of Internet based employee incentive and loyalty programs. Snowfly's incentive system allows contact centers to harness the enormous motivational power of immediate positive reinforcement to focus employee behavior on company objectives. Compared with home-grown programs, Snowfly improves KPIs by at least 20% (sales, availability/adherence, attendance, call quality), reduces a huge administrative burden and reduces costs. The results are easily seen within weeks and there is no long term obligation. Snowfly customers include multiple Blue Cross/Blue Shield providers, Hyatt Hotels, Time Warner Cable, Avis/Budget, financial institutions, utility companies, cable/satellite providers, various BPO companies (business process outsourcers), and collection departments/agencies.

Visit Snowfly online at www.snowfly.com.

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Collection industry officials say that a report excoriating the ARM industry is full of statistical flaws. The report, released by The Legal Aid Society, MFY Legal Services, Inc., NEDAP, and Urban Justice Center, charges debt buying companies with debt collection abuses that particularly target low-income New Yorkers and people of color.

Industry experts also suggest that many of the report’s concerns could be better addressed if there were less restrictive rules for communicating with debtors.

The report alleges that debt purchasers in New York City routinely violate New York law by filing meritless lawsuits against low- and moderate-income New Yorkers without having proof of their claims and without notifying people that they have been sued (“New Report Exposes Systematic Debt Collection Abuses,” May 26).  Debt buyers nevertheless prevail in more than 9 out of 10 cases. 

The report based its findings on an 18-month study from 2006-2008, when debt buyers won $1.1 billion in judgments against New Yorkers, the vast majority of whom lived in low-income communities and communities of color.  The report also documents a strikingly uneven playing field in which only 1 percent of people sued were represented by legal counsel.

“The report misperceived the data before it,” said Barbara Sinsley, general counsel for debt buying trade group DBA International. “It says that debt buyers are targeting minorities by looking at the locations of consumers and making those with more minorities a target area. It’s not a function of the debt buyers targeting minorities, it’s a function of the amount of debt in the area.”

Sinsley called “unsubstantiated” the report’s findings that 70 percent of consumers had no support when sued. “There’s no quantitative support for that statement. I could take the same resources and write a report about how debtors are being supported in New York City.”

Fred Blitt, president of the National Association of Retail Collection Attorneys (NARCA) added: “I think this uses a very broad brushstroke to paint the entire industry. They say that debt purchasers target low-income people and people of color. Why would I want to target low-income people? I want to be able to collect. And I don’t know if a person is green or black or white, and why would I care?”

Blitt noted that low-income people lack the resources to hire an attorney, so naturally they would go to local legal aid offices, which was the genesis of the report.

Sinsley and Blitt added that many of the lawsuits are due to a debt collector’s inability to contact the debtor.

“The problem isn’t with the debt buyers, it is with the lack of communication,” Sinsley said. “Perhaps consumers don’t communicate because they have no money or perhaps because they don’t know what they should be doing.”

Laws restrict the forms and types of communications that collectors can make, Sinsley added. So there is less liability if the collection firm files a lawsuit.

Blitt added that there would be far fewer lawsuits filed by ARM companies if debtors would contact collectors once they receive a demand letter. If the debtor doesn’t respond to communication attempts, the only recourse is a lawsuit.

The report also cited the case of a person who had been sued but didn’t owe the debt in question. Blitt said mistakes do occur, but only in a very small percentage of cases. “We do serve people properly and do follow state laws,” he noted.

“The new laws in New York are another problem when it comes to communication,” Sinsley said.

DBA International highlighted the details of the law that became effective for New York City collectors on April 24 in a Member Alert:

1. When providing verification:

• Documents must be a copy of the “debt document issued by the original creditor” or an “original written confirmation evidencing the transaction resulting in the indebtedness.
• Itemization: A final statement from the original creditor must be given along with an itemization of principal and other charges.

2. Disclosing a Debt is Past Statute

• A debt collector must disclose that the time limit to sue has expired.
• A debt collector must disclose that new payments could restart the statute of limitations.

3. Written confirmation of payment schedules

• Including the name of the original creditor.
• The name of the employee or supervisor that made the arrangement.
• The specific amount and due date for each payment.
• Identification of payment of multiple accounts.
• Mailing confirmation of satisfaction of debt.

4. Record to be maintained for six (6) years, including:

• All written communications with the consumer
• Recordings of all conversations or 5 percent of all calls made or received.
• Copies of all service of process contracts.
• Copies of all actions by government agencies that resulted in revocation or suspension or a court order.
• Copies of all training manuals.

5. Call back number must be to a natural person

• Phone number must be answered by natural person or routed to a natural person within 60 seconds.

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Last week, we ran a press release under the headline “NY Statewide Coalition Urges Legislature to Curb ARM Industry Abuses.” The headline was nothing terribly out of the ordinary; the ARM industry is used to facing opposition from coalitions of concerned citizens and the like.

And to be honest, the content of the release was not startling. It was an announcement in support of new laws in New York that would make it harder for debt buyers to file suit against consumers. While the legislation is misguided, it should be expected that various consumer groups would support such a measure. The release mentioned a group called the New Yorkers for Responsible Lending coalition.

What is surprising, however, is the identity of the actual organization that distributed the release. The above-named coalition did not send it out. It was released by the New York chapter of the American Association of Retired Persons (AARP). This fact should be cause for concern to ARM professionals engaged in policy lobbying.

As far as special interest groups go, few have the clout and power of the AARP.  The group claims over 40 million members, and while they all have disparate voting affiliations, the pressure the group can bring to bear on lawmakers is enormous.

In my recollection, there has not been a more powerful membership group to align itself directly against the ARM industry.

The National Treasury Employees Unions, itself quite influential, successfully lobbied the IRS to drop private debt collection vendors from its recovery strategy. But the NTEU is nothing compared to the AARP.

The press release distributed by the group used anecdotal evidence culled from the experiences of two retirement-age New Yorkers to paint a terrible picture of the entire industry. So the group appears to be putting all of its PR might behind the effort.

Ultimately, this impacts regulations in just one state, albeit a rather large one. But it should be noted that an extremely formidable group has aligned directly against ARM interests and that further pressure of its kind may be forthcoming.

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Adel, IA — collector mentor, the credit and collection industry’s premier training aid, announced today that it has teamed up with insideARM.com to offer a weekly content series aimed at motivating and inspiring credit and collection professionals.

“The mission of collector mentor is to inspire, motivate, and educate members of the credit and collection industry, and delivering a recurring, simple challenge that supports our mission made The collector mentor Challenge an ideal fit,” said Gary Jensen, editor of collector mentor. “I’m personally very excited to have the opportunity to inject some positive energy into the industry, especially at the frontline level."

The collector mentor Challenge will explore a variety of topics including careers, personal growth, health, family and friends, and finances. To help readers get the most out of the program collector mentor has also made available two downloadable tools that participants can use to chart their progress and experiences.

“Similar initiatives have worked well in life coaching and business coaching programs, and we wanted to apply that model to the credit and collection industry,” said Jensen “I fully believe that participation in the The collector mentor Challenge will help industry professionals learn more about themselves, and in turn, lead them to greater levels of success and satisfaction in what they do, ultimately helping them close the gap between where they are and where they want to be.”

According to Michael Klozotsky, managing editor of insideARM.com, “The lion’s share of media coverage of the ARM industry is both aimed at the corporate level and often tinged with scorn. Given these common representations it’s easy to forget that collection agencies’ most valuable assets go home in the elevator each night and together form the largest class of industry personnel. A part of insideARM.com’s mission is to humanize debt collection work and illustrate its basic similarities to most other occupations in America. We are pleased to partner with collector mentor on a content series specifically developed for the people whose hard work drives this industry.”

For more details on The collector mentor Challenge, please visit www.collectormentor.com/thechallenge and http://www.insidearm.com/go/collector-challenge.

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ACA International is continuing to work with a broad coalition of interested industries and trade associations to convince the FCC to revise its proposed rule implementing the Telephone Consumer Protection Act (TCPA).

The proposed rule requires a consumer's written consent, accompanied by extensive disclosures, before a business may use an autodialer or prerecorded message to place a non-telemarketing call to a wireless number that the called party has provided to the business as a contact number. The proposed rule reverses two decades of Commission guidance, on which American businesses in all industries and segments of the economy have relied.

At the conclusion of the initial public comment period, which ended on May 21, over thirty-five associations and individual businesses submitted comments opposing the FCC proposed rule. Alongside these comments, over 1700 ACA members submitted comments to the FCC supporting our comments and opposing the FCC proposed rule. This popular support for ACA's position indicates the broad-based appeal of our proposals and strongly demonstrates the need for the FCC to modify its rule.

In addition, the Federal Reserve and Departments of Education and Treasury filed comments opposing the proposed FCC rule. Each of these entities shared many of the same concerns voiced by ACA's coalition, which include the difficulty to collect outstanding debts when creditors are unable to contact consumers regarding their payments. This kind of statement of disapproval within the government is a strong signal to the FCC that their efforts to protect consumers are misguided.

Associations within ACA's coalition submitted an ex parte letter to the FCC highlighting the proposed rule's restriction on businesses sending valuable, non-telemarketing messages to the increasing numbers of consumers who have agreed to be contacted at wireless devices. This is an important issue within the FCC proposed rule, and ACA is dedicated to work with other concerned associations and companies to ensure this rule is never enacted.

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The Georgia Supreme Court recently upheld a lower court ruling that the state’s attorney general’s office, acting on behalf of the Governor’s Office of Consumer Affairs, overstepped constitutional bounds in demanding documents from a law firm practicing debt collection in the state.

Georgia's Office of Consumer Affairs (OCA) was investigating Frederick J. Hanna & Associates (FJH), based in Marietta, Ga., following consumer complaints about the firm’s debt collection practices. OCA requested files from FJH in their investigation, which FJH refused to hand over. OCA then had the state attorney general file a lawsuit against the company to compel them to cooperate.

Fred Hanna, CEO of the company, said that his firm had offered to turn over all files for cases in which there was a consumer complaint, but the OCA had requested all files, which would include thousands of cases.

"They were taking the shield law used to protect consumers and turning it into a sword to attack me," Hanna said. "There are already enough laws to protect debtors."

A lower court agreed and denied the state's request for the files, stating that because FJH's day-to-day operation directly involves the practice of law, and because the investigative demand directly impacts their practice of law, that demand is an attempt by the OCA to regulate the practice of law and constitutes an impermissible interference by the executive branch into the exclusive jurisdiction of the Court in violation of the separation of powers doctrine.

On June 7, the Georgia Supreme Court upheld the ruling. The seven-justice panel was split on the decision 4-3.

Even with the success his firm had against the state, Hanna expects lawsuits against collection firms to continue to multiply as plaintiff attorneys look for cases that are difficult to fight. Many law firms that pursue collections do so throughout the country, Hanna explained.

He noted that it is very costly to fight a case filed in a different jurisdiction, like Hawaii. These cases would dry up quickly if laws were changed to require filing of cases wherever the collection firm is domiciled, Hanna said.

Hanna doesn't expect a further appeal of the case because he doesn't see any federal implications. Yet he says that other debt collection law firms in other states, if they have similar laws to Georgia, might be able to cite this case if they face similar circumstances.

"Every lawyer in state of Georgia should be thanking Fred Hanna for taking on the state government on behalf of law-abiding lawyers," said John H. Bedard, Jr., managing partner of Bedard Law Group PC, Duluth, Ga. "He did not yield to the tremendous pressure that a state can put on a defendant."

It's very easy to sensationalize the behavior of "a few bad actors" in the industry, Bedard added. "Fred is not one of them. The state court has vindicated Fred. Every lawyer in the state owes him a debt of gratitude."

Even though Hanna won the case in the state's highest court, Bedard expects state officials to continue aggressively pursuing cases against collection firms, because such cases make good political press.

"There is no need for more regulation of law-abiding collection firms, but unfortunately, politicians get a lot of mileage out of reporting to their constituencies that they’ve taken on a wrong-doer and collection agencies are erroneously targeted. It makes a lot of headlines."

The coverage tends to be one-sided, according to Bedard. "The articles paint us all with the same sort of brush. No one reports about the good collection firms do for consumers. Law-abiding firms help consumers dig out of their financial problems. They help consumers save their homes, save their automobiles protect their credit and get their financial affairs in order. The public needs to know all of the good that the industry does – helping keep children in school, clothes on their backs and food in their mouths. The industry delivers an estimated $39 billion back to the economy. That benefits everyone in the country."

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