Some FCRA Issues to Take off the Table NCHER Knowledge Symposium November 9, 2012 John L. Culhane, Jr., Partner Consumer Financial Services Group

2 Use of Credit Reports for Employment Employer must provide prior written disclosure (slightly different rules for applications by mail, telephone, or similar means) Employer must obtain employee’s prior written authorization (slightly different rules for applications by mail, telephone, or other similar means) Employer must give notice prior to taking adverse action and must provide a copy of the report at the same time

3 Summary of Consumer Rights Employer must provide the Summary of Consumer Rights at the same time (prior to adverse action) New Summary required as of January 1, 2013 New Summary reflects enhanced role of CFPB Requires replacing information for FTC (agency name, address and URL) with information for CFPB Requires new chart with a more extensive list of regulators

4 Disputes Must conduct an investigation with respect to the disputed information Must review all relevant information provided by the consumer (or the consumer reporting agency) Must complete the investigation within specified time limits Must report the results of the investigation to the consumer (or the consumer reporting agency) Must correct any inaccuracy

5 Reporting Disputed Information May not furnish disputed information without noting that it is disputed Problem for one or more institutions (per Supervisory Highlights) Part of American Express Settlement (although this probably involves the interplay of the FCBA and FCRA) TRAP FOR THE UNWARY – Just because you disagree, doesn’t mean there was (is) no dispute

Student Loan Bankruptcy Update NCHER Knowledge Symposium Kelly Lipinski McGlinchey Stafford PLLC November 9, 2012

Congressional Report on Student Loan Department of Education and Consumer Financial Protection Bureau Report, August 2012 –Statistical data from industry –Anecdotal data from industry, consumers, and general public 7

Congressional Report on Student Loans Source: Consumer Financial Protection Bureau, Private Education Loan Report, Table 15 (August 29, 2012). 8

Congressional Report on Student Loans 9

Consumer Protection Issues Report concludes that private education loans are treated very differently in bankruptcy proceedings compared to other consumer debt. Bankruptcy protection for loans emerging from 2005 standard, which is that all loans made for a qualified education expense are exempt from discharge in bankruptcy. 10

Consumer Protection Issues Research indicates the amendments to the Bankruptcy Code has not resulted in a decrease in the cost of credit or increase in the access to credit, which raises questions of whether the amendments make sense today. 11

Public Policy Consider public policy issues as student loans are treated the same as: –Child Support –Alimony –Tax Liens –Claims arising from wrongful conduct (i.e., DUI and battery). 12

Public Policy Are student loans more like tax liens or car loans? If Congress concludes the 2005 amendments have not met policy goals, it would be prudent to modify the Bankruptcy Code in light of the impact on young borrowers in a challenging labor market. 13

Dischargability The presumption is that student loans are not dischargeable in bankruptcy. 11 U.S.C. § 523. However, the debt may be discharged upon a finding of undue hardship under the Brunner standard. –The First and Eighth Circuits have adopted the “totality of circumstances” test. 14

Dischargability The debt may be discharged upon a finding of undue hardship under the Brunner standard: –The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans; –That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and –The debtor has made a good-faith effort to repay the loan. 15

Misrepresenting Bankruptcy Status Easterling v. Collecto, Inc., 692 F.3d 229 (2nd Cir. 2012) Collecto had a contract with the Department of Education to collect overdue loans. Upon a finding the borrower seeks bankruptcy protection, Collecto would assign the debt to its internal department to determine whether the debt was discharged. 16

Misrepresenting Bankruptcy Status If the debt had not been discharged, Collecto would send a letter with the following statement: 17

Misrepresenting Bankruptcy Status Court analyzed the letters and statement using the “least sophisticated consumer standard”. Are Collecto’s collection letters open to more than one reasonable interpretation, one of which is inaccurate? 18

Misrepresenting Bankruptcy Status Collecto violated the federal Fair Debt Collection Practices Act when it sent the consumer a letter that stated her student loans were “ineligible for bankruptcy discharge” and therefore the account “must be resolved”. –The least sophisticated consumer would interpret the letters to mean discharge is wholly unavailable. –Such a statement is “false, misleading, or deceptive”. 19

Successful Discharge In re Bene, 474 B.R. 56 (Bank. W.D. N.Y. 2012). The court previously held, on multiple occasions, that a decision to “stay poor” after bankruptcy, despite high- paying options, does not satisfy the Brunner test. 20

Successful Discharge - Bene Entered college at 25 and borrowed approximately $17,000, but left college without a degree to care for ailing parents. Worked on an assembly line for over 25 years and tried to pay down debt, but when laid off, she owed $56,

Successful Discharge - Bene The first two interests: federally- guaranteed loan program to make education available to persons without wealth or creditworthiness and the forgiveness of debt to enable a “fresh start”. Court considers a third interest: the William D. Ford Program, which enables debtors to “satisfy”, not “repay”, debt after long period of affordable payments. 22

Successful Discharge - Bene Although Brunner remains strong, after the 1987’s test is satisfied, the court will look to the “totality of the circumstances”. –The flexibility of Ford program must be reconciled with Brunner test. –Also consistent because growth of options for “satisfaction” of debt. Outstanding balance was discharged, but holding likely to have limited value due to unique facts. 23

Successful Discharge Ackley v. Sallie Mae Student Loans (In re Ackley), 463 B.R. 146 (D. Me. 2011). –Court granted a discharge of approximately $460,000 of student loans. –Using “totality of circumstance” test, age and medical issues demonstrated an undue hardship. 24

Questions 25

NCHER Knowledge Symposium Legal Updates and TCPA Issues November 9, 2012 Lawrence A. Laskey V.P., General Counsel Windham Professionals

Absent “Consent” TCPA Prohibits Using auto-dialers to call cell phones Leaving automated messages on landlines Leaving automated messages on cell phones (including texts) Navigating the Sea of Change 2012 NCHER Knowledge Symposium 27

Landlines: “Special Rules” Written consent for telemarketing Commercial/non-solicitation calls “Wrong party” calls Navigating the Sea of Change 2012 NCHER Knowledge Symposium 28

What Constitutes “Consent”? Need for affirmative action Limited to the context Providing the number – “Downstream” consent? – Limited to debt collection? Navigating the Sea of Change 2012 NCHER Knowledge Symposium 29

How Is Consent Obtained? Clearly, and in writing Orally Given in connection with existing debt – When must it have been given? – To whom? Navigating the Sea of Change 2012 NCHER Knowledge Symposium 30

Who Must Consent? Who has authority? – Cell phone subscriber – Others? “Wrong party” calls? – Transferred numbers – “consent” by non-subscriber – “Unintended or incidental” recipient – Just plain wrong number Navigating the Sea of Change 2012 NCHER Knowledge Symposium 31

Revocation of Consent Written or oral? Can it be revoked? Navigating the Sea of Change 2012 NCHER Knowledge Symposium 32

Hobbs Act “Exclusive” jurisdiction FCC Declaratory Ruling FCC orders raised as a defense “Read the whole statute” Navigating the Sea of Change 2012 NCHER Knowledge Symposium 33

Automatic Telephone Dialing System “Equipment which has the capacity to store or produce telephone numbers to be called using a random or sequential number generator and to dial such numbers” Capacity of the equipment, without regard to actual use Focus on lack of human intervention in the dialing process = all predictive dialers Navigating the Sea of Change 2012 NCHER Knowledge Symposium 34

Cell Consent Numbers provided to creditors Affirmative consent to dialer calls/messaging Navigating the Sea of Change 2012 NCHER Knowledge Symposium 35

Consider… Revisit the “is it a dialer” issue? Include express consent in documents – Downstream transfers – Policy, script and training for oral consents Check “propriety” of consent? Include a revocation process Navigating the Sea of Change 2012 NCHER Knowledge Symposium 36