State responses to the COVID-19 pandemic are changing fast. For all of us, it’s a very uncertain time. Now that unemployment claims have topped 6.65 million, governments are trying to lessen the financial pain for consumers already struggling to pay their debts. In many cases, the impact on third-party collection agencies has been severe.
What should you be doing to keep calm, carry on, and manage risk in these unprecedented times?
Earlier this week, I sat down with two of my Ontario Systems colleagues—Compliance Consultant Director Sara Woggerman and Senior Director of Product Engineering and Product Management Dan Womack— for our first weekly COVID-19 crisis management webinar, “Understanding ‘Inconvenient Time’ and State Restrictions During This Most Inconvenient Time.” We discussed what ARM businesses need to consider and do to successfully navigate the new legal landscape in the age of COVID-19.
State Stay-at-Home Orders: How to Operate Responsibly
State stay-at-home orders have caused enormous disruption for many ARM agencies. Our goal is to help you weather the storm by keeping you informed so you can adapt to changing circumstances in compliance with state and federal mandates.
Before we discuss how you might approach collections in the COVID-19 era, let’s talk about the operational adjustments you’ll need to make in the days and weeks ahead.
Determine whether you’re an essential business
Review the definition of financial services or financial affiliates under your state’s definition. Some states are changing their definitions after issuing a stay-at-home order or within the order itself. In the case of commercial debt, you’ll want to review the definitions of the debt and debt collector under state laws.
Identify any remote work requirements or barriers
Certain states prohibit remote collections entirely. Others allow it but impose additional requirements. Some states have temporarily waived branch licensing requirements. If you’re looking for real-time updates, Cornerstone Support’s Coronavirus guidance (for both employment matters and collection activity) is an outstanding resource.
Pro tips
- Catalog your remote workers’ locations. Some states require this information.
- Call your insurance company to find out if they need the information as well.
- Be ready to defend against future negligence claims by having collectors attest, in writing, to the fact that they are working in a private, closed-off area of their home; are adhering to your policies and procedures; and are following your workstation expectation with regard to clean desk, password protections, etc.
Guidelines and Restrictions Governing Collection Activity
State guidelines and mandates related to suspension of debt vary widely, and they’re changing often. For the duration of the COVID-19 crisis, someone in your organization should be dedicated to staying on top of these changes. In addition to Cornerstone Support, insideARM, ACA International, and the Receivables Management Association International (RMAI) are great sources of COVID-19 guidance.
Consumer attorneys read the civil liability section of the Fair Debt Collection Practices Act (FDCPA) frequently, if not daily. Right now, most ARM leaders aren’t thinking long term about exposures they might be creating. But there are some things you need to do today to close gaps and prevent exposure later.
Credit reporting
You’ll need to determine how state-ordered suspension of collection activity or deferment of payments may affect consumers whose data you’re reporting. Then you’ll need to decide whether you’ll furnish any new data or accounts.
Earlier this week, the CFPB issued guidance on the Fair Credit Reporting Act (FCRA). As a result of the pandemic, the CFPB will consider the consumer reporting agency or furnisher’s individual circumstances when dispute responses are delayed beyond the 30-day guideline. As long as you’re making a good-faith effort to investigate disputes as quickly as possible, the CFPB will not cite an examination or bring an enforcement action.
Pro tip
See the Consumer Data Industry Association (CIDA) FAQ document 58 for codes collectors should use for accounts affected by a natural or declared disaster.
Payment processing
You’ll need to establish a policy that outlines how deferred payments will be handled. The legal risks posed by preauthorized EFTs, payment plans, checks on record, etc., will differ from payments the consumer-initiated themselves via portal, phone, or IVR.
In states that have prohibited collection activity, your safest bet is to suspend any payment plans involving charging credit cards or debiting accounts until you have contacted the consumer. Understand, some agencies have taken the position that unless the state order or law specifically prohibits the collector from processing previously authorized payment arrangements, they are willing to assume the risk of noncompliance.
Interacting with consumers
The FDCPA’s inconvenient time provision is alive and well. As always, you’re prohibited from contacting consumers at a time or place affected by a natural disaster or declared state of emergency.
Many consumers have been deeply affected by COVID-19, whether they’re sick, caring for someone, in the hospital, or unemployed. I recommend asking consumers outright whether and how the crisis is affecting them so you can successfully defend an inadvertent violation of the inconvenient time provision.
It’s important not to let the use of a dialer or any sort of prerecorded message block your ability to detect consumers who are particularly hard hit by this crisis.
Pro tips
- Stop workflows for any communications you and your legal counsel deem high risk.
- Provide agents with scripts that account for consumers’ stress and unease. Empathy is crucial during this time.
- If you are the middleman between consumers and a creditor and law firm, stay in close contact with the law firm so you’ll know how they’re responding to the crisis (e.g., suspending garnishment).
Bottom Line: Consult Your Attorney, and Proceed with Care
Language in some states’ collection restrictions leaves room for interpretation. Instead of mandating a suspension of activity, they “urge” or “encourage” certain steps. Discuss these guidelines with your attorney, and consider his or her input and your risk tolerance before making any decisions.
It’s also important to document everything you’re doing in response to this crisis including technology changes, script changes, and relocation of personnel. Keep these details well organized in a central location. Any change you make is a deviation from standard policy, so you must be prepared to show that you had reasonable procedures in place to comply with COVID-19 state mandates and existing federal law.
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