How Technology is Changing the Collections Terrain Licensing and Regulatory Considerations Kathryn L. Ryan Partner, Buckley Sandler LLP Tim Lange Chief Operating Officer, APPROVED by Buckley Sandler October 16, 2018

Overview Emerging Technologies and Products Regulatory and Compliance Implications Partnering with Fintech Firms State Regulatory Initiatives and Considerations

Emerging Technologies and Products Consumers have greater access to credit and ways to make payments to creditors and other industry participants Finance Peer-to-peer lending platforms Apply for loans through an app Making Payments Take payments through an App Consumer loans Mortgages Other Services Pay for parking and other day-to-day services But what happens when consumers fail to pay?

Emerging Technologies and Products – Partnering with Fintech Fintech can expand product offerings to more consumers Technology permits more precise underwriting and innovative solutions to accessing liquidity and credit Also raises regulatory and compliance questions: Are more options better? What happens when consumers fail to pay?

Regulatory and Compliance Implications – When Default Occurs With greater access to products and technology comes heightened risk for industry and consumers. For consumers: More ways to pay means more ways to miss payments or default. For industry: More ways to collect payments, mean more ways to trigger licensing and regulatory requirements.

Regulatory and Compliance Implications – Who, What, When, Where? Activities don’t fit neatly within Collection Agency Laws WHO Who is collecting the claim or debt when doing so through an App? Who must hold a license where one company holds the right to enforce, but another is contacting the consumer? WHAT What is a claim? What is a debt? What constitutes consumer contact in the App age? WHEN When is a payment considered in default for a service? WHERE Where is collection activity taking place – i.e. in the borrower’s state? The state where the technology resides?

Regulatory and Compliance Implications – Who, What, When, Where? Case Study: Arizona Collection Agency Law WHO Collection Agency means, among others, all persons engaged directly or indirectly in soliciting claims for collection or in collection of claims owed, due or asserted to be owed or due. WHAT Claim means an obligation for the payment of money or its equivalent and a sum or sums owed, due or asserted to be owed or due to another. WHEN The licensing trigger does not always to depend on whether the claim is in default. WHERE The licensing trigger does not appear to address geographic location of the person collecting the claim, although it is likely triggered by where the consumer is located.

Regulatory and Compliance Implications – Who, What, When, Where? Case Study: Arkansas Collection Agency Law WHO Collection Agency means, among others, a person which engaged in the collection of delinquent accounts, bills, or other forms of indebtedness owed or due or asserted to be owed or due to another. WHAT Claim is not defined but the licensing triggers appears limited to delinquent claims. WHEN The license is only triggered if the claims were in default at the time of acquisition. WHERE The licensing trigger does not appear to address geographic location of the person collecting the claim, although it is likely triggered by where the consumer is located.

Partnering with Fintech Firms Licensing Does the Fintech Firm hold the requisite state authorities? Does the creditor/holder of servicing rights hold the requisite state authorities? Vendor Management Consumer Disclosures Compliance with Fair Debt Collections Act and state law Compliance Management System Privacy and Information Security E-Sign

Some Trends Simultaneous Licenses and Partnering Model Growth in Consumer Lending Market – but will this continue? Identifying Borrowers and Collecting on Debt Artificial Intelligence Communication Methods Credit Reporting Agency Settlement

State Regulatory Initiatives & Considerations Can State Regulators Create Consistent Guidance? Challenges with Registering in NMLS Company Record: Personnel and Owners Company Record: Locations NMLS 2.0

Ideas for State & Industry Collaboration Definitions or Glossary Review use of Consent Orders Facilitating Discussion of New Business Ideas Non-US Based Entities Application Nuances Brick & Mortar Requirements Financial Implications Uniformity

Questions Kathryn L. Ryan 202-349-8008 kryan@buckleysandler.com Tim Lange 202-349-7926 tim@approvedlicensing.com