©2013 Morrison & Foerster LLP | All Rights Reserved | mofo.com FTC Update November 13, 2015 Andrew Smith Morrison & Foerster LLP

2 Personnel Changes at FTC New Chairman FTC Commissioner Edith Ramirez New Commissioners Prof. Joshua Wright taught law & economics at GMU Law School Terrell McSweeny (nominated) Longtime aide to VP Biden New Senior Staff Jessica Rich, Director, Bureau of Consumer Protection Reilly Dolan, Associate Director for Financial Practices

3 Small-Dollar Lending Cases PLS Financial Services Storefront lender Data security: allegedly tossed sensitive consumer financial information in a dumpster Privacy notices: required that annual GLBA notices be signed by customers and kept in files

4 Small-Dollar Lending Cases Vantage Funding falsely promised “cash in an hour” and 80% approval rate Charged $30 fee via a remotely-created check Allegedly purchased information as well “According to the trade group that represents online lenders, legitimate participants in this industry do not charge an application or processing fee.“ Ideal Financial Solutions Billed w/o authorization (said it was fee for payday loan) May have purchased consumer information

5 Internet Lending Litigation Western Sky MTD denied: Limited to fairness of the contract’s forum selection clause Favorable language re: a non-resident internet borrower “The proper focus is on the Borrower's ‘activities’ or ‘conduct,’ not solely the Borrower's physical location.” AMG Services MTD Ruling Tribally owned and chartered companies can be subject to the FTC’s jurisdiction under the FTC Act Defendant tribal corporations may not be subject to the FTC’s jurisdiction, if not operated for private profit. Partial settlement Debt collection claims Reg E claims

6 Payment Processor Enforcement Pro Credit Group LLC & Sanders Legal Group (9/13) Alleged “phantom debt collection” scam Used processing relationship to collect payments for phantom collectors Alleged interest rate reduction scam Robocalls from “Rachel” at “cardholder services” Automated Electronic Checking, Inc. (3/13) First Bank of Delaware follow-on Telemarketers, RCPOs, and return rates as high as 80%

7 Payment Processor Enforcement Independent Resources Network Corp. (6/13) debt relief, TSR, credit cards (10% to 40%) Newtek Merchant Solutions (6/13) Treasure your Success (interest rate reduction) Credit cards, MC watch list CFPB payment processor case Meracord LLC (10/13) Debt settlement TSR “assisting and facilitating” “Covered person” liability for UDAAP

8 FTC Payments Rulemaking Proposed TSR Amendment would prohibit telemarketers and sellers in both inbound and outbound telemarketing calls from accepting or requesting remotely created checks, remotely created payment orders, cash-to-cash transfers, or cash reload mechanisms. ABA Response The FTC should focus on addressing deceptive and abusive actions by telemarketers, rather than “blame this payment mechanism for creating the harm.”