Compliance Review and State Law Update Dena Glaeser, Navient Michael Del Valle, Sessions Fishman Nathan & Israel

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Consumer Complaints » CFPB Complaint Statistics 2011

Consumer Litigation » LAWSUITS ON THE RISE

Consumer Complaints on the Rise» FTC and CFPB annual complaint volume has steadily increased, rising 80% from 91,000 in 2012 to 163,700 in 2013. Over 170,000 CFPB complaints have already been received as of August 2014. CFPB Consumer Response: A Snapshot of Complaints Received

Consumer Complaints on the Rise» CFPB Consumer Response: A Snapshot of Complaints Received

Litigation Hotspots» Sessions identifies jurisdictional trends and tailors the practice to meet the needs of the debt collection industry, giving the firm a national reputation as the largest practice area dedicated to protecting collection firms and debt buyers.

The FDCPA » Fair Debt Collection Practices Act CFPB Litigation Statistics 2013-2014

The FDCPA» Call Volume The FDCPA prohibits “causing a telephone to ring … repeatedly … with intent to annoy, abuse, or harass[.]” 15 U.S.C. § 1692d(5). There is no bright line rule on how many calls is reasonable. Courts consider all circumstances including: Call volume Pattern of calls Notice of wrong number or cease & desist request “Debt collectors do not necessarily engage in harassment by placing one or two unanswered calls a day in an unsuccessful effort to reach the debtor, if this effort is unaccompanied by any oppressive conduct (threatening messages).” Pugliese v. Prof'l Recovery Serv., Inc., 2010 WL 2632562 (E.D. Mich. June 29, 2010) (quoting Saltzman v. I.C. Sys., Inc., 09-10096, 2009 WL 3190359 (E.D. Mich. Sept. 30, 2009) (quoting Millsap v. CCB Credit Services, Inc., No. 07–11915, slip op. at 8 (E.D. Mich. Sept. 30, 2008); see also Martin v. Select Portfolio Serving Holding Corp., 2008 WL 618788, (S.D. Ohio, March 3, 2008).

PASSED MUSTER TO DEFEAT MOTION TO DISMISS OR SUMMARY JUDGMENT The FDCPA» Call Volume PASSED MUSTER TO DEFEAT MOTION TO DISMISS OR SUMMARY JUDGMENT 11 times over a period of 19 days, 2 calls on the same day Valentine v. Brock & Scott, PLLC, 2010 WL 1727681 (D.S.C. Apr. 26, 2010) 17 times in 30 days Brown v. Hosto & Buchan, PLLC, 748 F. Supp. 2d 847, 852 (W.D. Tenn. 2010) 9 calls in 30 days Carr v. NCO Fin. Sys., Inc., 2011 WL 6371899 (E.D. Pa. Dec. 20, 2011) 101 calls in 59 days Brandt v. I.C. Sys., Inc., 2010 WL 582051 (M.D. Fla. Feb. 19, 2010) 200 calls in 19 months , many after oral C&D request Joseph v. J.J. Mac Intyre Companies, LLC., 238 F.Supp.2d 1158, 1168 (N.D.Cal.2002) 26 calls in 60 days Akalwadi v. Risk Mgmt. Alternatives, Inc., 336 F.Supp.2d 492 (D.Md.2004) 4 calls per day for 6 months Prewitt v. Wolpoff & Abramson, LLP, 2007 WL 841778 (W.D.N.Y. Mar. 19, 2007) 54 calls to work in 6 months (17 in 1 month, 6 in 1 day) Sanchez v. Client Services, Inc., 520 F.Supp.2d 1149, 1160–61 (N.D.Cal.2007) 67 calls in 6 months, many after written C&D request Kerwin v. Remittance Assistance Corp., 559 F. Supp. 2d 1117, 1125 (D. Nev. 2008) 350 calls in 8 months Pugliese v. Prof'l Recovery Serv., Inc., 2010 WL 2632562 (E.D. Mich. June 29, 2010) We recommend: no more than 2 calls per day and always more than 2 hours apart.

The FCRA » Fair Credit Reporting Act CFPB Litigation Statistics 2013-2014

The FCRA» General Duties under FCRA: Correct and Update Tradeline Information Notice of Dispute Notice of Closed Accounts Notice of Delinquent Accounts Provide Notice of Identity Theft Information Investigation of Disputes Notice of Results to Consumers 15 U.S.C. § 1681s-2

The FCRA» The Special “You Are In Trouble” Texas Rule The Texas Debt Collection Act (TDCA) requires a collector to respond to a consumer’s dispute in writing within 30 days from receipt of the dispute: Denying the inaccuracy Admitting the inaccuracy; or Stating that the debt collector has not had sufficient time to complete an investigation of the inaccuracy.

The TCPA » Telephone Consumer Protection Act CFPB Litigation Statistics 2013-2014

The TCPA» What is an ATDS? An ATDS is “equipment which has the capacity (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C. § 227(a)(1) Courts have interpreted that to include any system that has the present capacity to store or generate numbers, even if you don’t actually use those functions. Current TCPA- while no guarantees, some compliant technology options: LiveVox HCI LiveVox Manual Blend TCN Manual Dial Only Global Connect Manual Dialing Betterwrx Manual Dialing Radius Cell Manager

The TCPA» Scrub for Cell Phones Scrub for cell phones before you dial. The following are free search providers: Searchbug.com Whitepages.com Cellrevealer.com Phonelookup.com VOIPs should be treated as cell phones to avoid potential liability Recent case law suggests VOIPs may be treated as cell phones under the TCPA See Lynn v. Monarch Recovery Mgmt., Inc., 953 F. Supp. 2d 612, 627 (D. Md. 2013), pending on appeal in the 3d Cir. Court of Appeals

The TCPA» “Soppetize” the Number Autodialing old cell numbers is risky. Soppet – “called party” is the subscriber of the cell phone See Soppet v. Enhanced Recovery Co., LLC, 679 F.3d 637, 640 (7th Cir. 2012) Osorio – “called party” is the actual recipient of the calls, not the intended recipient. See Osorio v. State Farm Bank, F.S.B., 746 F.3d 1242 (11th Cir. 2014) Breslow – consent must come from subscriber of the cell number at the time of the call We recommend: to minimize liability, manually dial until you confirm the debtor is still the current subscriber

State Laws: Convenience Fees» While the FDCPA presents a separate risk, whether a convenience fee for processing payment by credit card is “permitted by law” depends on the state: Prohibit Convenience Fees May Prohibit Convenience Fees Do Not Expressly Prohibit California Colorado Connecticut Florida Idaho Illinois Indiana Maryland Massachusetts Minnesota Mississippi Nevada (unless give special notice) New York North Carolina Ohio Oklahoma Pennsylvania South Carolina Tennessee Washington Wisconsin Wyoming Kansas Maine Texas Utah Alabama Alaska Arizona Arkansas Delaware Georgia Hawaii Iowa Kentucky Louisiana Michigan Missouri Montana Nebraska New Hampshire New Jersey New Mexico North Dakota Oregon Rhode Island South Dakota West Virginia

State Laws: Convenience Fees» March 26, 2013 – a debt buyer and debt collection law firm settled for $799,958 for convenience fees charged to pay by credit card, debit card, or check by phone. See FTC v. Security Credit Services, LLC, and Jacob Law Group, PLLC, 113-cv-00799-CC (N.D. Ga. Mar. 26, 2013). April 11, 2014 – receivables company ordered to pay a $21,000 civil penalty for collecting convenience fees to pay by credit card or check by phone. Pending: Court denied debt collector’s motion to dismiss an FDCPA case, holding that its $5 surcharge for payments via credit card may have violated the law. See Quinteros v. MBI Associates, Inc., 2014 WL 793138 (E.D.N.Y. Feb. 28, 2014)

State Laws: Call Recording » State laws vary Must have nationwide program for nationwide compliance We routinely survey the 50 states for statutory changes and litigation trends

State Laws: Call Recording» Federal law requires that at least one party taking part in the call must be notified of the recording See 18 U.S.C. § 2511(2)(d) State laws vary, but generally: This means that in some states, it is illegal for the consumer to record the collector without consent. We recommend: debt collectors should always announce that the call is being recorded or monitored. all parties must consent to the recording or monitoring only one party must consent to the recording or monitoring California Connecticut Florida Hawaii Illinois Maryland Massachusetts Montana Nevada New Hampshire Pennsylvania Puerto Rico Washington All other states

State Regulations – New York New York’s Department of Financial Services regulations published December 3, 2014. New debt collector requirements relating to: additional disclosures to consumers following initial communications, new validation (substantiation) requirements, statute of limitation disclosure and procedure requirements, record keeping requirements, settlement procedures and email procedures. Most requirements effective March 3, 2015. Section 1.2(b) (charge off debt initial disclosures) and section 1.4 (substantiation of charged off debt) effective August 30, 2015.

New York – Concerns Types of Debt Covered Disclosures Applicable to All Debt Disclosures Applicable to Charged Off Debt Time Barred Debt Disclosure “Substantiation” Record Retention Payment and Settlement Agreement Requirements Quarterly Accounting Satisfaction of Debt Email Communications Steep Penalties under NY Financial Services Law section 408 - $5,000 per offense.

Recent NYS DFS Guidance The Regulations can be found at: http://www.dfs.ny.gov/legal/regulations/adoptions/dfsf23t.pdf The Department has published interpretations at http://www.dfs.ny.gov/legal/regulations/adoptions/faq-debt-collect.htm