As part of the festivities to mark the end of one calendar year and the start of a new one, I ask different professionals from across the accounts receivable management industry for their predictions for the coming year — what do they think is going to happen, what kind of year is it going to be for collection operations, etc. But that’s not where the fun ends. The following year, I ask those who made predictions to revisit them and see what they got right and what they got wrong. A year ago, a number of industry professionals made predictions about 2023. Here is how they think those predictions stacked up.
Joann Needleman, Clark Hill
Last year I warned the industry about the Consumer Financial Protection Bureau’s (CFPB) continued focus on unfairness as a theme that would guide their supervision and examination priorities. I don’t think my prediction missed the mark, although the push back by industry is encouraging, resulting in the CFPB taking some hits.
First, where I got it right was on the CFPB’s expansion of unfairness into discrimination, not only in the lending space but in all areas of financial services. This was clearly evident in the release of the CFPB’s Policy Statement on Abusive Acts and Practices in April 2023. According to the CFPB this Policy Statement was meant to assist “government enforcers” in identifying and alleging abusive conduct in the marketplace under the Consumer Financial Protection Act of 2010 (CFPA). The CFPB foreshadowed a policy shift on the UDAAP front by expanding the scope of “Abusiveness,” as a new approach to proving up discrimination while at the same time curtailing any defenses by industry to such claims. Subsequent reports, supervisory highlights, speeches and “issue spotlights” zero-ed in on consumer financial products and services that the Bureau considered to be abusive and therefore discriminatory. (See, Feb 2023 CFPB Blog Post, Appraisal Standards must include Federal Prohibitions against Discrimination; April 2023, Speech by Director Chopra at Justice Department Interagency Event: Efforts to Combat Modern-Day Redlining; April 2023, CFPB and Joint Agency Statement: Automated Systems have Potential to Produce Outcomes that Result in Unlawful Discrimination; April 2023, CFPB Office of Research Blog: Civil Judgments are not evenly Distributed; Summer 2023 Supervisory Highlights: CFPB Exams Find Unfair, Deceptive, and Abusive Practices Across a Wide Array of Consumer Financial Product Lines; and November 2023 Consent Order against Citi for Illegal Discrimination against Armenian Americans.)
Fortunately, the Courts have been pushing back on this agenda. In the case of Townstone Mortgage, a Federal District Court in the Northern District of Illinois rejected the CFPB’s theory that the Equal Credit Opportunity Act’s (ECOA) coverage applies to prospective applicants and dismissed the CFPB’s claim that a radio show discouraged African-American applicants in the Chicago area from applying for mortgages. The Seventh Circuit Court of Appeals just heard oral argument and were equally skeptical of the CFPB’s theory. In September, a Federal District Court in the Eastern District of Texas vacated the CFPB’s updated UDAAP manual finding that characterizing discrimination as “unfair” went beyond the CFPB’s authority as defined by the Dodd-Frank Act. The CFPB has since withdrawn the September 2021 version of the UDAAP module in the Examination Manual only to replace it with the original version.
Don’t expect these setbacks to deter the CFPB. As we head into an election year, the CFPB will continue to use its very expansive authority to support its priorities of addressing unfairness and discrimination. The Supreme Court will not strike down the CFPB or its funding mechanism so expect the CFPB to be active in the areas of supervision, enforcement and litigation.
Happy and Healthy New Year to all.
Michael Lamm, Corporate Advisory Solutions
It’s always fun to look back at your predictions and see where you missed the mark and/or nailed it. I would say about 25% was a “miss” on my end, specifically, my views that we would head into a “text book” recession in 2023. The economy still continues to be robust, low levels of unemployment and high consumer demand for products and services but the cracks are starting to happen, specifically with rising delinquencies across the credit card and auto markets.
As I noted in my 2023 prediction, debt sales will continue to be back in “vogue” after the drought during Covid-19. This will drive lenders and investors to deploy capital with seasoned debt buyers who are excited about the increase in delinquencies with the expectation that portfolio prices will decline too. I don’t see much changing in 2024 being it is an election year but I do expect that interest rates may be decline slightly prior to the election which may drive a rebound in home purchases. I think we will continue to see a lot of regulatory dynamics around medical credit reporting and also expect issues to pop up in the student loan repayment process that started in October 2023. I expect that more delinquencies will start to result from student loan borrowers who are unable to handle the additional expense on a monthly basis.
I am hoping, like all of you are, for a strong tax season!
Happy New Year and all the best in 2024! I hope to see many of you at the 2nd ARMTech in January!
Leslie Bender, Eversheds Sutherland
Looking back at 2023 and my 2023 predictions about privacy and data security, I would never have imagined the Federal Trade Commission (“FTC”), our federal privacy enforcer for the past two decades, would re-define what is a data breach to include “unauthorized disclosures” of nonpublic consumer data. In so doing, the FTC expanded its use of its UDAP authority under the FTC Act – and also dusted off from the shelves a never-before-used federal Health Breach Notification Rule. This formidable use of the FTC’s enforcement powers – now coupled with a flex of its rule-writing muscle to add a breach notification requirement to the FTC’s Safeguards Rule signals the potential for significant further enforcement in 2024 when entities suffering a breach will now need to report significant breaches to the FTC. As expected, the CFPB and FTC are fully exploring AI, dark patterns, algorithms and the risks of discrimination and UDAAP associated with these technology tools. What was not expected was the intense federal regulatory interest in alternative data sources, data brokers, and a proposed expansion of the Fair Credit Reporting Act (“FCRA”) to bring those industries under the FCRA umbrella. 2024 should see continued rulemaking efforts at the CFPB – potentially even finalization of a financial data set of rules under Section 1033.
California’s Privacy Protection Agency continues to evolve its enforcement while living up to its promise to write rules not only about data brokers, cyber risk, and other key CCPA topics – but also about artificial intelligence. In its last meeting of the year, the CPPA also began to take a look at how all California’s privacy regulatory efforts are affected by and may be affecting the insurance industry. California will continue to pioneer regulatory and enforcement in the privacy and information security space – continuing to navigate a balance between innovation with regulation as artificial intelligence opportunities keep arising.
As predicted, the National Consumer Law Center, enjoyed considerable success in getting laws prohibiting medical debt credit reporting passed in New York and Colorado – and other bills related to medical debt protection being enacted in states including Minnesota and Illinois. 2024 should continue to be a year in which state lawmakers are receptive to and interested in passing laws related to medical debt. Concurrently those same state lawmakers are keenly interested in where consumers’ data and information is being collected, by whom, and who is monetizing it and how. States that have as yet been unsuccessful passing full scale privacy bills may have more success in the coming year.
My best prediction at year end last year was that the 2023 innovation of ARMTech would be a huge success – and again, of course I underestimated. Not only was ARMTech a tremendous event but it sparked dozens of important AccountsRecovery webinars on topics and issues raised at that conference. I predict 2024 will see more positive influence of ARMTech. Thanks and gratitude are due for the time and involvement of our technology subject matter expert friends who generously share their time and talents in these programs. In addition I predict that in 2024, that wonderful networking event – the Women in Consumer Finance – will enjoy another impressive, life-changing year.
Very best wishes to all for a safe, healthy and wonderful 2024!
Aaron Reiter, InterProse
Reading my end of 2022 prediction that the ARM market would still be alive and well in a year, I feel pretty good. Yes, 2023 has seen more consolidation than in the past and a fair number of agency closures, but those agencies who are pivoting to leverage digital communication and consumer self service tools are not suffering. Maybe I should have qualified it, but I really think that strategic pivots is what has always defined the ARM industry – as client and consumer preferences change, so do we; as regulatory requirements change, so do we; as certification requirements change, so do we.
2023 was a record year for welcoming new customers to InterProse and I don’t think we were alone in technology companies specializing in the ARM market. I suppose if I had really channeled my inner Nostradamus, I would have used more metaphors so it could be interpreted in more ways to suit the reader’s desired take-away, but overall I’m not upset with my prediction.
Here’s the thing (to everyone who is still bothering to read what I think), you’re essentially in the same position today as any other moment when your agency or department needed to evolve to react to market pressure. The difference is that now the updates to your processes are bigger than scripting a consumer interaction or ensuring response times to disputes. Those could be done by you with minimal knowledge of technology, all by yourself. What’s different about today is that technology runs everything we touch, including our consumers’ and clients’ preferences. Pivoting today means leveraging technology and probably trusting experts to optimize those tools. It’s initially harder if you’re not a “techie” – I’ll give you that – but it’s a pivot to respond to the landscape, just like every other time in your business’s history.
2024 will be no different. The shift toward technology began in earnest before this year and continues to present new opportunities for evolution to the modern agency. Agency owners and operators can still focus on what they’re good at, like running the business! Trusting partners to execute on the plan and embracing change are key to the future!
Mark Ravanesi, TrueAccord
Continuation of consolidation throughout the industry, favoring those with digital capabilities. Hit. And expect it to continue this year.
Omni channel will no longer be nice to have; it will become table stakes in 2023. PartialHit. Overall, there seemed to be more of a focus on continuing to establish digital capabilities versus interconnected omni channel strategies. Late adopters will be playing catch-up in 2024.
Liquidation challenges when the GLBA rules go into effect as collectors identify compliant and intuitive approaches to increase engagement. Partial Hit. While some liquidation impact was seen, agencies deployed solutions allowing customers to continue engaging in a compliant manner. In this case, I’d say a Partial Hit is a win for consumers and the industry.