Ask the Attorneys Moderator: Kelly Lipinski, McGlinchey Stafford Presenters: Larry Laskey, Windham Professionals John Culhane, Ballard Spahr, LLP Kelly Lipinski, McGlinchey Stafford Arthur Rotatori, McGlinchey Stafford Dino Tsibouris, Tsibouris & Associates, LLC David Head, Weltman, Weinberg & Reis Co. LPA

NCHER Knowledge Symposium November 4-6, 2015 Larry Laskey VP. General Counsel

Regulator Concerns Consumers do not get enough information about the debt to know if it is theirs, if the amount is correct and to whom it is owed Mistakes are made regarding how much is owed, and who owes it Contacting a consumer about a debt implies we have confirmed the amount that is owed and this is the person who owes it November 30, 2018

Substantiation at Placement? CFPB ANPRM Documentation provided or available at placement Dispute history Contact restrictions “…debt collectors (are responsible) to ensure that they do not facilitate the … collection of illegal loans.” State law (CA, NC) substantiation rules for purchased debt Have (or assure access to) debt documentation in anticipation of “mandatory” substantiation (e.g. NYS charge off debt)? November 30, 2018

“Don’t Wait for Rulemaking” 2012 FTC Asset Acceptance Consent Decree Reasonable basis for claiming debt is owed “Conditional” reliance on creditor Complete, reasonable investigation of disputes 2013 FTC NCO Stipulated Order Ability to substantiate at time payment demand is made Provide results of dispute investigation to consumer 2015 CFPB Encore Capital and Portfolio Recovery Consent Orders Reliance in the face of debt purchase agreement restrictions and disclaimers Reliance where supporting information is unavailable or does not support the debt November 30, 2018

“Don’t Wait for Rulemaking” Asserting a claim for payment without having substantiated it may violate FDCPA, FTC Act and/or UDAAP Reliance on creditor is limited; question it if Disproportionately high rate of “similar” disputes Failures to respond to dispute Information provided in response does not support the debt Review documentation, payment and dispute history before attempting or resuming resolution efforts Debt “validation” is now debt “substantiation” November 30, 2018

More Information for Validation Notices ? CFPB ANPRM “History” of debt ownership Debt Itemization (pre and post charge off) Balance as of last statement sent to the consumer Payment history Accompanied by debt documentation New York (as to “debt” that is “charge off”) Name of original creditor Amount due at charge off Interest, fees and other charges accrued since charge off Payments made since charge off November 30, 2018

New York “Validation” on Any Request Statewide (again, “charge off” “debt”): Copy of debt documentation Account statement Chain of title, including date(s) New York City (all debt) Copy of debt documentation (not created after default) Final statement of account from original creditor Document that itemizes the debt, date each component was incurred and basis of obligation to pay it Yonkers (all debt) Written documentation identifying original creditor Itemization of all charges November 30, 2018

Other Jurisdictions Chicago, IL Massachusetts Timely, written validation requests Itemization of balance, separating out pre and post charge off amounts Identify and describe basis of the obligation Massachusetts Written or oral request at any time All documents bearing consumer’s signature Account records showing balance, payments and charges, etc. November 30, 2018

A Primer on the Military Lending Act Ask the Attorney 2015 NCHER Knowledge Symposium November 4, 2015 San Antonio, TX John L. Culhane, Jr., Partner Consumer Financial Services Group 215.864.8535 culhane@ballardspahr.com Copyright 2015 by Ballard Spahr LLP

New Military Lending Act Rules Rules protect service members and dependents Effective 10/1/15 but mandatory 10/3/16 Rules apply to all student loans not excluded from TILA DMDC and credit bureau safe harbor Substantive written and oral disclosure requirements Statement of MAPR Any (every) Regulation Z disclosure (written only) Description of payment obligation Key limitations on credit terms 36% APR No arbitration and probably no class action waivers

Consequences and Challenges Civil liability Actual damages or statutory damages of $500 per violation Punitive damages Costs and reasonable attorney fees Loan note or credit agreement “void from inception” Arbitration may be unenforceable even with safe harbor Difficulty in identifying dependents DMDC and credit bureau safe harbors of no help May require perfection under TILA for all disclosures

CFPB Complaint Database & Narrative Response Process Kelly Lipinski NCHER Knowledge Symposium November 4, 2015

Creation of Complaint Database Congressional mandate to create a database to facilitate the collection of, monitoring of, and response to consumer complaints. 12 U.S.C. § 5493(b)(3)(A). Complaints will be routed to agencies for investigation, shared with agencies for enforcement purposes, and analyzed. CFPB reviews a complaint to verify a commercial relationship exists, not that the complaint is accurate.

Publication in the Database A complaint goes in the database the earlier of: i) 60 days from submission (prior to June 25, 2015, 15 days) or ii) when the company responds to the consumer and CFPB. Type of complaint, date of submission, consumer’s zip code, and the company’s name. Whether company’s response was timely, how the company responded, and whether consumer disputed company’s response. As of June 25, 2015, a consumer narrative.

Narrative Response The database now allows for consumers to submit an unstructured, free-text consumer narrative. Consumer advocates believe the narrative could help consumers prevent problems by researching companies and could allow the CFPB to detect patterns before extensive damage is caused. Industry representatives are concerned about privacy risks and unverified or duplicative complaints. Companies have the opportunity to respond using a set list of structured response options. The CFPB has requested feedback on best practices to normalize complaint data so it is easier for the public to use and understand.

Complaint Narrative: Examples

Borrower Defenses Under the Higher Education Act: A Sleeper Issue for Private Education Loans? Arthur J. Rotatori McGlinchey Stafford (216) 378-9932 arotatori@mcglinchey.com

Borrower defenses to the repayment of HEA loans is found in HEA; regulations 20 U.S.C. § 1087e(h); 34 C.F.R. § 685.206(c) Somewhat obscure; seldom used Provides a defense to repayment of a federal loan where the borrower has a claim under state law related to the loan or the provision of educational services Excludes, per DOE interpretation, personal injury tort claims and civil rights claims

What constitutes a claim under state law? What about statute of limitations? Who bears the burden of proof? What about group claims vs. individual claims?

What constitutes a claim under state law? If there is a borrower defense to a government loan, does that create a defense to a private loan made to the same borrower to attend the same school? What about the politics of a borrower being released from a government loan while still being bound to a private loan? What about the FTC Holder in Due Course Rule?

Managing Loan Servicing Compliance Risk Dino Tsibouris (614) 360-3133 dino@tsibouris.com

Consumer Law Compliance Lender is required to comply and retains responsibility Lender may delegate compliance functions to third party if supervised appropriately “Turn-key” vendors offer financial service products How is compliance risk addressed in the contract?

What Laws? ESIGN Act, State UETA – Contract formation GLBA – Privacy notice ECOA – Credit approval/decline FCRA – Notices, consumer reports, reporting FDCPA – Collecting the loan EFTA – Accepting loan payments Licensure – Authorization to provide services

Licenses that May Apply Consumer Lending License Loan servicing license Debt collector license Loan broker license

Key Issues Administering underwriting criteria (discretion) Promptly crediting customer payments Allocating overpayments Forbearance Documenting procedures Managing compliance actively Monitoring customer complaints

FDIC Enforcement Action Comenity Bank FDIC enforcement of FTC Act (Sept. 8, 2015) $61.5M in credits,$2.4M in fines Misstatements when customers transferred to third-party salespeople after activation See also: Citibank ($700M)

NCHER Knowledge Symposium: Ask the Attorney Time-Barred Debt Presented by: David A. Head, Esq. 216-739-5006 dhead@weltman.com November 4-6, 2015

Time-Barred Determination Federal vs Private Student Loan Defined by statute Varies by state Which state law applies? Choice of law provision Borrowing statute Generally not a discharge or satisfaction of the obligation, but SOL expiration makes it legally unenforceable

How to Calculate Time the claim accrues Date of last payment Date of default Date payment became due Charge-off is not the default date Impact of payment or promise to pay

CFPB and Rulemaking Neither FDCPA, nor Dodd-Frank address SOL UDAAP ANPR for Debt Collection Will likely result in rules proposed for collecting time-barred debt Will likely develop model language to be used in communications Will likely require partial payment disclosure

CFPB Amicus Briefs Asserted that actual or threatened litigation not necessary to constitute FDCPA violation Settlement offer can be misleading Stated: “A debt collector’s communication need not contain overtly false statements to be misleading or deceptive; omissions may also deceive.” The letters in question did not indicate the SOL expired

Court View Circuit Court split created with two recent cases falling in line with the CFPB’s position outlined in previous slide Courts did not rule that all collection activity on time-barred debt violates FDCPA Proof of Claim filing on time-barred debt

Questions?