1. El CID Responding to a CFPB Civil Investigative Demand November 1, 2012 Copyright 2012 by Ballard Spahr LLP Christopher J. Willis, Partner Consumer Financial Services Group 678.420.9426 willisc@ballardspahr.com

2. Enforcement: What’s Happened and What’s Coming Next CID Activity So Far Practical observations about CIDs The CFPB’s First Consent Orders The Bureau's first ruling on a petition to set aside or modify a CID Preview of administrative enforcement procedures Preview of regional enforcement office activity

3. CID Activity So Far The CFPB does not announce CIDs, but targets have occasionally announced them in securities filings. CFPB has also stated it will publish orders on motions to set aside or modify CIDs unless there is "good cause" for confidentiality We are aware of CIDs in the following industry sectors:  Credit card payment protection / add-on products  Private student lending  Subprime auto finance  Debt collectors/buyers -Captive reinsurance of PMI  Payday lending Are there really 100 or more CIDs out there?

4. Practical Observations on CIDs Breadth of requests Descriptions of the “nature of the conduct constituting the alleged violation” Reluctance to extend deadline to file Petition to Set Aside or Modify All decisions on compromises/modifications made by the Deputy Director Petitions decided by the Director, with judicial review unspecified in terms of availability and standard of review The CFPB’s e-discovery experts

5. The CFPB’s First Consent Orders Large amount of monetary relief involved Tie-in with credit card complaint data released several weeks before first settlement Underlying alleged violation is a familiar one – subject of prior AG actions and private class actions Information was said to have arisen “through our supervision process,” highlighting the connection between supervision and enforcement Promise of future enforcement actions: “We expect announcements about other institutions as our ongoing work continues to unfold.” (Richard Cordray)

6. First Decision on a Petition to Set Aside Bureau published its first decision recently on a petition to modify or set aside a CID Clear that Bureau does not accept relevance (in terms of time period or subject matter) to be a proper objection Also clear that Bureau does not require much specificity of itself in defining the purpose of a CID Heavy emphasis on proving claims or undue burden with evidence, rather than simply making objections Also strong emphasis on meaningful participation in "meet and confer" process Portrays CFPB enforcement staff as reasonable and open to compromise Possible judicial review?

7. Preview of Things to Come Administrative enforcement procedures Speed of proceeding Lack of discovery Hearsay admissible No limitation on remedies available Regional enforcement offices Four offices: Northeast, Southeast, Midwest, and West Purpose of regional enforcement presence