Consumer Collections & What to Expect in 2023
What can executives working in collections and recovery expect in 2023?
Over the past few years, consumer collections has experienced its ups and downs and transformed in many ways, especially with the implementation of Regulation F. Undoubtedly, this new rule has changed the world of debt collection.
With so many questions still looming, our shareholders Dan Best, Mike Dougherty, and Jamie Hart – with moderator, shareholder, and Consumer Collections Group chair David Head – sat down for a recent webinar to discuss all of the top issues. Each of these professionals oversee the firm’s practice in several different locations – from Cleveland and Cincinnati, OH to Detroit, MI, and Philadelphia, PA. Their expertise expands across all aspects of consumer collections in states including Ohio, Pennsylvania, Michigan, Illinois, Indiana, Kentucky, and New Jersey.
With so many questions still looming, our shareholders Dan Best, Mike Dougherty, and Jamie Hart – with moderator, shareholder, and Consumer Collections Group chair David Head – sat down for a recent webinar to discuss all of the top issues. Each of these professionals oversee the firm’s practice in several different locations – from Cleveland and Cincinnati, OH to Detroit, MI, and Philadelphia, PA. Their expertise expands across all aspects of consumer collections in states including Ohio, Pennsylvania, Michigan, Illinois, Indiana, Kentucky, and New Jersey.
Key topics throughout the engaging webinar included:
- Important documentation and information needed (with Regulation F and more)
- State-specific trends and how they may affect other states
- Statute of limitations
Here are a few big takeaways from our industry thought leaders!
Question: Is Regulation F applicable to an original creditor?
Shareholder Jamie Hart: Regulation F has been in our lives now since 2020, but only effectively since 2021. The short answer to the question is “No”. Regulation F only applies to the debt collectors. And, as a first-party creditor who is collecting their own debts, those rules do not apply.
With that said, Regulation F does affect first-party creditors because you have to work with agencies, attorneys, etc. to collect your debts. The number one way it can impact you is in oversight. The Consumer Financial Protection Bureau (CFPB) has supervisory authority over entities based on certain thresholds. For example, our firm is subject to CFPB oversight. If we, as your attorneys, are doing your work, you still have vendor oversight responsibilities and need to ensure we're doing the right thing. Even though you, as a first-party creditor, may not be subject to the rule 7 on contacts, you need to make sure that we are.
The other real impact to a first-party creditor is related to the information that needs to be provided, especially at the referral stage, when the demand letters would be sent out. Regulation F provides some safe harbors and tries to tackle new technology that wasn't out in the 1970s when the Fair Debt Collection Practices Act (FDCPA) was originally issued.
There is also a renewed demand layer, which we now call the model validation notice. The amount of information that you have to provide as a first-party creditor to your agency, attorney partners, etc. is very significant compared to what used to be required.
With that said, Regulation F does affect first-party creditors because you have to work with agencies, attorneys, etc. to collect your debts. The number one way it can impact you is in oversight. The Consumer Financial Protection Bureau (CFPB) has supervisory authority over entities based on certain thresholds. For example, our firm is subject to CFPB oversight. If we, as your attorneys, are doing your work, you still have vendor oversight responsibilities and need to ensure we're doing the right thing. Even though you, as a first-party creditor, may not be subject to the rule 7 on contacts, you need to make sure that we are.
The other real impact to a first-party creditor is related to the information that needs to be provided, especially at the referral stage, when the demand letters would be sent out. Regulation F provides some safe harbors and tries to tackle new technology that wasn't out in the 1970s when the Fair Debt Collection Practices Act (FDCPA) was originally issued.
There is also a renewed demand layer, which we now call the model validation notice. The amount of information that you have to provide as a first-party creditor to your agency, attorney partners, etc. is very significant compared to what used to be required.
Question: Have you seen any trends in state court’s requiring additional documentation to support suits and obtain judgments?
Shareholder Dan Best: Beyond what's required by Regulation F, we really have not seen anything on the suit side in Michigan. Regarding obtaining judgment, there was recently a change to Michigan court rules. Historically, we could file one document that was both a default and a default judgment. Now we have to file a default, wait, serve the debtor or serve the defendant, and then file the default judgment. Therefore, we have seen a slight increase in our timelines toward obtaining judgments in the state of Michigan.
Shareholder Michael Dougherty: For Pennsylvania, it’s a county-specific state. Each county has its own rules. But what we're starting to see is, some of these counties establishing their own rules for purposes of how to file a suit and the documentation needed. Traditionally, you would file a lawsuit, attach the contract and attach the statement, and that would be sufficient to begin your case. Now, the courts in some counties are almost making you prove your case at the time you file your complaint. They're requiring us to not only have the contract but also a significant amount of statements attached at the time of filing the complaint.
Shareholder Jamie Hart: For Kentucky and Indiana, there is certainly a trend of more courts wanting more documents or saying that they’re going to want more documents. And, that's not necessarily in the contested cases, that's more or less in uncontested cases. So yes, documentation is certainly key and if there's any trend it's going that way.
Shareholder David Head: In Ohio, it really depends on the courts and judges. Understanding the requirements of individual jurisdictions is critical.
Shareholder Michael Dougherty: For Pennsylvania, it’s a county-specific state. Each county has its own rules. But what we're starting to see is, some of these counties establishing their own rules for purposes of how to file a suit and the documentation needed. Traditionally, you would file a lawsuit, attach the contract and attach the statement, and that would be sufficient to begin your case. Now, the courts in some counties are almost making you prove your case at the time you file your complaint. They're requiring us to not only have the contract but also a significant amount of statements attached at the time of filing the complaint.
Shareholder Jamie Hart: For Kentucky and Indiana, there is certainly a trend of more courts wanting more documents or saying that they’re going to want more documents. And, that's not necessarily in the contested cases, that's more or less in uncontested cases. So yes, documentation is certainly key and if there's any trend it's going that way.
Shareholder David Head: In Ohio, it really depends on the courts and judges. Understanding the requirements of individual jurisdictions is critical.
Watch the full webinar & contact our team
To learn more about statewide trends, statute of limitations, etc. watch the webinar and get all of your most pressing questions answered.
Our team is constantly monitoring the world of consumer collections and is happy to connect with you to tackle your additional questions. You can contact shareholders Dan Best, Mike Dougherty, Jamie Hart, and David Head at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
Our team is constantly monitoring the world of consumer collections and is happy to connect with you to tackle your additional questions. You can contact shareholders Dan Best, Mike Dougherty, Jamie Hart, and David Head at any time.
This blog is not a solicitation for business, and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.
