1. 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

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

3. 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

4. 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

5. “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

6. “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

7. 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

8. 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

9. 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

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

11. 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

12. 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

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

14. 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.

15. 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.

16. 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.

17. Complaint Narrative: Examples

18. Borrower Defenses Under the Higher Education Act: A Sleeper Issue for Private Education Loans?
Arthur J. Rotatori
McGlinchey Stafford
(216)

19. Borrower defenses to the repayment of HEA loans is found in HEA; regulations
20 U.S.C. § 1087e(h); 34 C.F.R. §  (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

20. 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?

21. 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?

22. Managing Loan Servicing Compliance Risk
Dino Tsibouris
(614)

23. 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?

24. 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

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

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

27. 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)

28. NCHER Knowledge Symposium: Ask the Attorney
Time-Barred Debt
Presented by:
David A. Head, Esq.
November 4-6, 2015

29. 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

30. 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

31. 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

32. 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

33. 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

34. Questions?