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Virginia Governor Signs Directive Requiring Enhanced Card Payment Security

posted on 2015-05-15 by By H. Scott Kelly and Michael E. Lacy

On May 5, Virginia Governor Terry McAuliffe signed an executive directive which sets enhanced security requirements for the purchase card program used by state agencies, including the implementation of “chip and pin” technology by December.  The directive further instructed Virginia’s treasurer, comptroller, and secretaries of finance and technology to implement enhanced payment technologies that “meet or exceed” federal standards for the state’s prepaid debit card, merchant, and purchase card programs.

“Ensuring the safety of citizen data is a critical responsibility of the Commonwealth of Virginia,” the Governor stated in the executive directive.  “In the face of ever-increasing cybersecurity attacks on consumer and business-related entities, I am committed to ensuring that transactions conducted between citizens and the Commonwealth meet the highest level of transactional security standards.”

The security features have been a hot issue for the Obama administration.  The President recently signed two executive orders that attempt to spur greater collaboration between the public and private cybersecurity sectors and encourage enhanced payment card technology.  The executive directive issued by Governor McAuliffe builds on both orders by making Virginia the first to apply the principles at the state level.

“I am keenly aware of the need for best practices and models to help spur states to advance their cybersecurity position and make it more difficult for hackers to gain access to our sensitive data,” McAuliffe said.  “We must partner with the federal government, the private sector and other states to push innovation and adoption of enhanced electronic payment technologies — by our agencies, our merchants and our citizens — to help reduce credit card fraud.  This directive will ensure the highest level of security for transactions conducted between citizens and state agencies.”




CFPB Extends CARD Act Comment Period Regarding Four Areas of Interest

posted on 2015-05-15 by Ethan G. Ostroff, H. Scott Kelly and Michael E. Lacy

As we discussed in March, the Consumer Financial Protection Bureau is soliciting public comment on how the credit card market is functioning and the impact of credit card protections on consumers and issuers.

To allow interested persons additional time to consider and submit their responses, the CFPB announced it is extending the comment period on four of the specific areas of interest noted in the original Request for Information, including online disclosures, grace periods, add-on products, and debt collection.

The 90-day comment period for these four areas will now end on June 17, 2015.  The original 60-day comment period for the other eight specific areas on which the CFPB is requesting information will end on May 18, 2015.




FTC Settles $26M Enforcement Action Against Credit Card Payment Processor

posted on 2015-05-15 by H. Scott Kelly and Michael E. Lacy

On May 5, the Federal Trade Commission obtained court approval of a settlement against CardFlex, Inc. and its CEO and President, Andrew Phillips, and Executive Vice President of Operations, John Blaugrund.  The lawsuit, captioned FTC v. CardFlex Inc. et al., No. 3:14-cv-00397 (D. Nev.), involved allegations that the defendants operated a $26 million credit card scheme by connecting consumers with another company known to be scamming customers.

According to the FTC, CardFlex partnered with iWorks, which allegedly tricked customers into paying monthly fees for non-existent services – including the use of fine print in its agreements to force customers to pay recurring monthly charges of up to $60 for online plans and services.  The FTC alleged that the defendants knew about iWorks’ deceptive practices and still helped it open nearly 300 merchant accounts under dozens of corporate names.

Under the settlement agreement, the defendants would pay $3.3 million (though that sum would be suspended pending a $150,000 deposit), the forfeiture of more than $1.2 million in jewelry, a Ford pickup truck, gold coins, and furniture, and a check on the truthfulness, accuracy, and completeness of financial statements and related documents.  The individual defendants are also permanently banned from acting as an independent sales organization or sales agent for a variety of services involving money-making opportunities, fraud prevention, and risk monitoring, and they must undergo a screening process before working with high-risk clients.




Think Credit Reports Are Too Expensive to Use as an Ongoing Due Diligence Tool? Think Again

posted on 2015-05-06 by Matthew Debbage, Creditsafe U.S.A.

A business credit report is most often used by credit and collections professionals at the beginning of a new client relationship to determine a company’s risk level before issuing a line of trade credit. But after that their usage tends to dwindle, largely because of the notion that obtaining reliable credit data is too expensive.

SunGard Corporate Liquidity’s Credit & Collections Global Benchmarking Study found a huge disparity in how much money companies spend on credit bureau data, based on their budget. According to the study, in 2014, 26 percent of companies with over $1 billion in revenue spent more than $150,000 annually on credit bureau data, while 29 percent of companies with under $1 billion in revenue spent less than $25,000 annually on credit bureau data. As you can see, the decision to purchase business credit data might appear to be contingent on a company’s financial wherewithal.

What’s unfortunate about this approach is that to get the most out of credit reports, they need to be used as an ongoing risk management tool, allowing you to spot any changes to your customer’s risk profile or payment behaviors and take action before they become a bigger issue. For instance, a credit monitoring service can provide regular alerts about any significant or sudden changes to a company’s financial status or credit health before the problem spirals into a bigger one, such as its credit rating, credit limit, payment behaviors, directors or legal filings.

Now for the silver lining. Credit reports have become more affordable in recent times, making it possible for businesses of all sizes to get more use out of them than they once could. Here are the primary factors driving down the costs:

-          The Internet – The delivery of credit reports via the Internet has made access for businesses more affordable by reducing or eliminating paper trails and speeding up the process of obtaining reports.

-          Flexible, subscription-based pricing models – Typically, a company would have to spend hundreds of dollars to get just one individual business credit report on a customer. Doing this quickly adds up. But now companies can sign-up for a subscription-based credit reporting service, allowing them to view credit reports on all of their customers, as often as needed.

-          De-monopolization – For decades, companies that needed reliable business credit information would have to turn to one of the big bureaus to obtain it, like Dun & Bradstreet or Equifax. But, this is quickly changing as more credit reporting bureaus are arriving on the scene to give American businesses more options, availability and pricing.


For these reasons, business credit reports are no longer just reserved for large companies with big pockets. If cost has held you back in the past from utilizing credit reports as a regular part of your risk management strategy, it doesn’t have to anymore.

About the Author

Matthew Debbage is the president of Creditsafe’s U.S. operations, overseeing the company’s expansion into the U.S. market. Creditsafe is the world’s most-used supplier of online company credit reports. Nearly 5,000 companies in the U.S. use its credit reports, ranging from small businesses to large, global concerns like Staples, Ryder and Nestle. Debbage, with more than 15 years of experience in market entry strategies, has successfully led the research, planning and launch of a number of operations in markets around the world, making companies more efficient and profitable.




NC Senator Michael Lee Might Be a Debt Collection Idiot

posted on 2015-04-30 by Steve Rhode
North Carolina is trying to pass legislation which will roll back protections for consumers who have bad debt purchased by debt buyers.

Senator Michael Lee from Wilmington, North Carolina is the sponsor of S.B. 511, titled Proof Required for Debt/Fees, which efforts to rollback the requirement the bad debt buyer must have detailed information about where and when the debt originated and details on how the fees were calculated, before suing the consumer.

I can only assume Senator Lee is just an ill informed legislator. Because either he doesn't care about to baseless claims his constituents face from bad debt buyers or he is becoming a cheerleader for debt collectors.

The News & Observer says Lee believes rolling back the 2009 consumer protections, which "passed by a unanimous vote in the Senate because, on a bipartisan basis, people were troubled on behalf of taxpayers about what was happening in the courts," is a smart thing to do.

Lee's argument about making it easier for collectors to sue is that consumers can challenge the suit in court and demand proof. But we already know people are afraid and don't challenge these suits so Lee's position is effectively to retard common sense protections already in place for consumers.

In my opinion, this legislation is ill-advised, ill-conceived and unwarranted. Besides, what we are really talking about here is just making sure the bad debt buyer has the information on hand to prove this is a valid debt. The only logical reason to remove this requirement would be so the bad debt buyer is not required to have this information on hand.

And to make this situation even more ridiculous, Lee is listed as an attorney on his North Carolina General Assembly page.

Screen Shot 2015-04-29 at 5.39.39 PM

But maybe here is another clue what might be driving this slap in the face of North Carolina citizens. The website for Michael Lee, the attorney, says "The firm focuses on...debt acquisition."

Lee's idiotic sponsored bill wants to make a charge-off statement proof a debt is owed. Stricken as proof required by Lee's bill is the contract which must contain the signature of the defendant and copies of documents generated when the credit card was actually used. Left in the bill is just a requirement that to prove the debt, the debt collector needs "A copy of the contract, charge‑off statement, or other writing evidencing the original debt." Will a Post-It note be sufficient now?

And in order to get a summary judgment against consumers who already don't know how to defend themselves, all that will be required will be:

"The only evidence sufficient to establish the amount and nature of the debt shall be at least all of the following items:
(1) The original account number.
(2) The original creditor.
(3) The total amount claimed to be owed.
(4) An itemization of post charge‑off payments or credits, where applicable.
(5) The charge‑off balance, or, if the balance has not been charged off, an explanation of how the balance was calculated.
(6) An itemization of post charge‑off fees, where applicable.
(7) The date of last payment, where applicable.
(8) The amount of post charge‑off interest claimed, and the basis for the interest charged."

All of that appears to be easy to just pull from the air and write on that Post-It note rather than say, actually have proof and evidence to support the claim.

Senator Harry Brown from North Carolina is quoted as saying, "I think the intent of this bill is to find a balance between where we are today and maybe where we were before '09 ... I think the key point of this is, this is debt that someone has gone out and decided not to pay."

But even Brown is as clueless as Lee. This is not an issue about not paying a valid debt. It is an issue that the debt that is being collected or sued over is in fact a valid debt.

Lee appears to be sticking to his illusions this bill won't screw consumers, "The burden of proof is not shifted in this matter," Lee countered. "I'm getting a little frustrated there are so many misstatements coming out." - Source

Surely, simply asking that the bad debt buyer have the proof the debt is really owed with common sense documentation like statements and contracts is not a requirement that North Carolina lawmakers should try to dilute. What do you think?





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