The CFPB Is Coming! The CFPB Is Coming! NCHER Knowledge Symposium November 7, 2012 Copyright 2014 by Ballard Spahr LLP Christopher J. Willis Practice Group Leader, Consumer Financial Services Litigation Group CFPB Update 2015 NCHER Fall Legal Meeting September 25, 2015 Minneapolis, MN

2 CFPB Continues to Focus Heavily on Student Loans – Especially with Regard to Servicing CFPB announced in a blog post in August 2015 that it was making inquiries to servicers regarding income-based repayment plan enrollment issues July 2015 report on servicemember student loans: “Overseas & Underserved” (issues highlighted: deferment, discharge, SCRA interest rate, DOD SLRP benefits) June 2015 midyear update on student loan complaints highlighted co-signer release issues May 2015 request for information and field hearing related to student loan servicing

3 Discover Consent Order CFPB alleged the following student loan servicing practices: -Overstatement of minimum amount due on statements -Information regarding interest paid and deductibility of student loan interest -Calls before and after permissible times of day under FDCPA -Failure to give FDCPA validation notices with regard to loans acquired in default The last allegation is especially significant

4 Student Financial Aid Services Consent Order Allegations regarding misleading/deceptive sales practices in connection with subscription services related to financial aid Alleged failure to comply with signed, written authorization requirement in EFTA / Reg. E in online/phone channels, for ACH and debit cards This EFTA issue is one we encounter very frequently with clients

5 Other Student Loan Focus Areas Underwriting: making loans (or certain loss mitigation options) too easy vs. too difficult to obtain (UDAAP) Payment processing and payment application (minimum payment, late fees, posting, failed debits, allocation, multiple loans, etc.) (UDAAP) Loss mitigation options – imposing federal-like requirements on private loans (deferment, forbearance, rehabilitation, income- based repayment) (UDAAP) Refinancing – disclosure of loss of benefits (UDAAP) Servicing transfers – notice of same and impact of transfer on borrower benefits (UDAAP)

6 Debt Collection We see the CFPB focusing heavily on collections issues in every industry segment, including student loans Legal collections are especially scrutinized – see CFPB v. Hanna and Encore/PRA consent orders Practice of law exclusion interpreted to apply only to consumers’ lawyers Media and documentation required to support any collection efforts, but especially legal collections “Validation” is morphing into “substantiation”

7 Fair Lending Developments BISG white paper and continued developments in dealer pricing cases in auto finance We are seeing heavy focus on regression analysis and matched pair testing of judgmental underwriting decisions in other industry segments Non-English language support and the CFPB’s unclear position on this very difficult subject Will the CFPB return to CDR and other fair lending issues it previously raised with private student loans?

8 Credit Reporting We see constant CFPB emphasis on credit reporting in exams and enforcement investigations in all industry segments 3 big focus areas: 1.Accuracy and integrity 2.Dispute investigation and resolution (direct and e-Oscar disputes) 3.Dispute flagging Coming soon: treating a broader variety of complaints/disputes as FCRA disputes

9 Presenter – Christopher J. Willis Partner at Ballard Spahr and Practice Group Leader of the firm’s Consumer Financial Services Litigation Practice 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”). Christopher J. Willis DMEAST# v. 1