The CFPB Is Coming! The CFPB Is Coming! NCHER Knowledge Symposium November 7, 2012 Copyright 2014 by Ballard Spahr LLP John L. Culhane, Jr., Partner Consumer Financial Services Group Christopher J. Willis, Partner Consumer Financial Services Group CFPB UPDATE 2014 NCHER Fall Legal Meeting September 26, 2014 Washington, D.C.

2 CFPB v. ITT CFPB sued ITT Educational Services, Inc. in federal district court in Indiana (S.D.) on February 26, 2014 Complaint alleged numerous UDAAPs (misrepresentation and coercion) and also alleged violations of TILA Motion to dismiss deemed filed on May 19, 2014 (Constitutional, jurisdictional, and pleading deficiencies) Opposition to motion to dismiss filed on June 12, 2014 followed by Reply on July 2, 2014 CFPB Notice of Supplemental Authority (Alta case) filed on Sept. 8, 2014 with Response on Sept. 19, 2014

3 CFPB v. Corinthian On Sept. 16, 2014, the CFPB sued Corinthian Colleges in federal court in Chicago. Claims revolve around several alleged themes: -Deception in connection with job placement/career services/job success of graduates -Failure to disclose Corinthian’s interest in loans -Making loans with knowledge that many borrowers would default -Debt collection practices, such as blocking delinquent students from attending class No response to the complaint is due until mid-November.

4 CFPB v. Hanna In July 2014, the CFPB filed its first lawsuit against a debt collection law firm, in federal court in Georgia. The lawsuit asserts two legal theories: 1.That the firm’s attorneys did not have “meaningful involvement” in the decision to sue a particular consumer, because the firm used automated scrubs and non-lawyer staff to screen cases for suit. 2.That the firm failed to monitor clients’ execution of affidavits to ensure that they were executed by persons with personal knowledge of the facts. Motion to dismiss filed and being briefed now Several other law firm investigations are ongoing now

5 Debt Collection Rulemaking The CFPB’s massive debt collection rulemaking started with an ANPR in late 2013; comments closed in early 2014; comments on survey closed on August 22, 2014 Topics covered include contact methods and frequency; disputes and validation requests; use of social media; and legal collections The rulemaking is potentially very far-reaching, covering every aspect of first-party and third-party debt collection Unclear if SBREFA panels will be established; if not, proposed rules are the likely next step; timing is unknown

6 Fair Lending Developments April 2014 Fair Lending Report says fair lending CMS should include statistical analysis of student loans Special edition of Supervisory Highlights released on September 17, 2014 discloses multiple non-public, supervisory resolutions (auto only – not student loans?) White paper released at same time explains CFPB’s use of BISG to proxy for race and ethnicity (obvious deficiencies include over-estimating number of minorities in portfolio) Will CFPB now return to CDR and other fair lending issues it previously raised with private student loans?

7 CFPB Complaint Portal April 2014 update on student loan complaints focused on certain cosigner issues (now part of exams and CIDs) Annual snapshot of complaints reported 11,400 student loan complaints (biggest issue – repayment) Proposed to expand complaint portal to include narratives released on July 16, 2014 (comment period just closed) Coincidentally, CFPB began “sharing stories about navigating consumer financial markets” on July 17, 2014 Are unverified narratives the equivalent of adverse postings on Yelp? Worse?

8 Presenter – John L. Culhane, Jr. Partner at Ballard Spahr and a member of the firm’s Consumer Financial Services and Higher Education Groups as well as the firm’s Fair Lending Task Force and Collection Documentation Task Force Higher education practice emphasizes counseling clients on the development, implementation and operation of innovative and traditional student loan programs, tuition payment plans, and school payment card programs Regulatory practice includes preparing clients for banking agency and CFPB targeted and full spectrum compliance examinations as well as assisting in the defense of consumer class actions, attorney general investigations, and agency enforcement actions Charter member of the American College of Consumer Financial Services Lawyers Former Chair of the Subcommittee on Fair Lending of the ABA Committee on Consumer Financial Services

9 Presenter – Christopher J. Willis Partner at Ballard Spahr and a member of the firm’s Consumer Financial Services, Higher Education, and Mortgage Banking Groups Counsels financial institutions on regulatory matters, advises them on compliance with consumer financial services laws, and defends them in both individual and class action lawsuits, as well as governmental enforcement actions (including CFPB investigations) Chairs the firm’s Fair Lending Task Force and Collection Documentation Task Force Recognized by Chambers USA for nationwide financial services regulation: consumer finance (litigation) Named in The Best Lawyers in America for banking and finance litigation and commercial litigation for 2013 & 2014 Member of the American College of Consumer Financial Services Lawyers Frequent author and speaker on issues relating to consumer financial services regulation and litigation

10 If you have any questions about anything we covered today, please contact: Questions / Resources – Ballard Spahr Visit our blog, the CFPB Monitor, at Subscribe to our e-alerts at (click “subscribe”). John L. Culhane, Jr., Partner Consumer Financial Services Group Christopher J. Willis, Partner Consumer Financial Services Group DMEAST# v. 1