1

Always consult with your own

legal counsel to ensure you are

following not only federal, but

also state and local laws.

2

Karen Reddick

Vice President Business Development

kreddick@ncmstl.com

➢ Compliance

➢ CFPB/UDAAP

➢ Cyber Security and the Safeguards Rule

➢ Handling Identity Theft Disputes (Red Flags Rule)

➢ Telephone Consumer Protection Act (TCPA)

➢ Credit Bureau Reporting-New Requirements (FCRA)

➢ Disputes and Validation: Applicable laws - FDCPA & FCRA

➢ Time-Barred Debt

➢ Collection Costs

➢ Gap Funding

➢ Financial Wellness

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➢ ECOA (Equal Credit Opportunity Act)

➢ FDCPA (Fair Debt Collection Practices Act)

➢ FCRA (Fair Credit Reporting Act)

➢ GDPR (General Data Protection Regulations)

➢ GLBA (Gramm–Leach–Bliley Act)

➢ IFAP (Federal Student Aid Regulations)

➢ Red Flags Rule

➢ TCPA (Telephone Consumer Protection Act)

➢ UDAAP (Unfair, Deceptive, or Abusive Acts or Practices)

➢ Etc. . .

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Created by Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

➢ Independent bureau within Federal Reserve System, run by Director who is Presidential Appointee, confirmed by Senate.

➢ Authority to issue rules for all financial institutions, including rules under Truth in Lending Act, Fair Debt Collection Practices Act, Equal Credit Opportunity and Real Estate Settlement Procedures Act.

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7

May 9th the BCFP announced it would reorganize the

student loan division.

➢Combining it’s student loan and financial education offices.

➢Student loan ombudsman will remain on staff.

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Changing time at the Bureau

➢ Fund the Bureau through Congressional

appropriations

➢ Require legislative approval of major

Bureau rules

➢ Ensure that the Director answers to the

President in the exercise of executive

authority

➢ Create an independent Inspector General

for the Bureau

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CFPB Activity

➢ Issued Guidance Documents

➢ June 2017, the CFPB issued updated Guidance

and Procedures for examining education loans

➢ Upcoming Proposed Rules

➢ Complaint Stats

➢ 317,200 consumer complaints

➢ 6% Student Loans

➢ Enforcement Activities

➢ Navient Corporation

➢ National Collegiate Master Student Loan Trust

➢ ITT Educational Services, Inc.

➢ Pennsylvania Higher Education Assistance

Agency

➢UDAAP

➢Service Providers

➢Collections and Collection Agencies

➢Complaint Process

➢Updating FDCPA

➢SCRA

➢Financial Literacy

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It is unlawful to engage in any Unfair, Deceptive, or

Abusive Acts or Practices

➢FDCPA makes it illegal for debt collectors to engage in this

activity

➢CFPB has authority to protect consumers against UDAAP

violations

➢Original creditors and debt collectors

Supervision of Service Providers

➢Financial institutions under Bureau supervision may be held responsible for their contractors.

➢Bureau’s expects that supervised financial institutions have an effective process for managing the risks of service provider relationships.

➢ A service provider is defined in the Dodd-Frank Act as “any person that provides a material service to a covered person in connection with the offering or provision by such covered person of a consumer financial product or service.”

➢Institutions must ensure that business arrangements with service providers do not present unwarranted risks to consumers.

Solution-Over see all third party services, require audits and make sure requirements are all contract driven

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➢ Established in 1977

➢ Legal protection from abusive debt collection

practices

➢ Promotes fair debt collection

➢ Ensure an avenue for disputing and obtaining

validation of debt – to ensure the accuracy

➢ Guidelines for debt collectors

➢ Works in conjunction with FCRA

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➢ Collect the correct debt: Collectors would have to scrub their files and

substantiate the debt before contacting consumers.

➢ Limit excessive or disruptive communications: Collectors would be limited

to six communication attempts per week through any point of contact

before they have reached the consumer.

➢ Make debt details clear and disputes easy: Collectors would be required

to include more specific information about the debt in the initial collection

notices sent to consumers. A tear-off is required.

➢ Document the debt on demand for disputes within 30 days.

➢ Stop collecting or suing for debt without proper documentation: If a

consumer disputes – in any way – the validity of the debt, collectors would

have to stop collections until the necessary documentation is checked.

➢ Stop burying the dispute: If debt collectors transfer debt without

responding to disputes, the next collector could not try to collect until the

dispute is resolved.

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➢ Electronic Communications

➢ Option to unsubscribe

➢ Time & place restrictions for electronic communications

➢ Use of workplace emails

➢ Social Media restrictions

➢ Limited content messages

➢ Telephone call frequencies

➢ Time Barred Debt

➢ Communication before credit bureau reporting

➢ Prohibit transfer of debt

➢ Providing required disclosures electronically

➢ Validation Notice

➢ Spanish Validation Notice

➢ Model Forms

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➢ First, a number of provisions call for creditors (or by

extension, servicers) to take action before a debt is

assigned to a collection agency in order to facilitate the

collection agency’s use of electronic communications with

the consumer.

➢ Second, creditors will be required to exercise effective

third-party oversight over debt collectors with whom they

place accounts, and understanding the proposed rules –

with all of their complexity – will be essential to doing this.

➢ Finally, there is the potential for the rules, when finalized,

to be applied directly to creditors and servicers under the

authority of UDAAP

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➢NPRM-Debt Collection Rules

➢https://files.consumerfinance.gov/f/documents/cfpb_debt-collection-NPRM.pdf

➢Implementation and Guidance

➢ http://www.consumerfinance.gov/policy-

compliance/guidance/implementation-

guidance/

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➢ Consumer Disputes are on the rise

➢ Collectors are flooded with mass produced dispute letters

➢ Increase in credit monitoring/credit repair organizations-generating additional disputes

➢ Template dispute letters available on the internet

➢ More consumers retaining legal counsel to represent them

➢ If debtor requests verification of debt, collector must

cease all collection activities until requested

verification is mailed by debt collector to consumer

➢ If debtor notifies in writing refusal to pay debt or wishes

debt collector to cease further communication, debt

collector shall not communicate further except:

➢To advise that although the debt collector's further efforts are

being terminated, the debt still exists

➢To notify that debt collector or creditor may or will invoke

specified remedies that are ordinarily invoked by them

➢ If debtor notifies or debt collector is aware that debtor is

represented by an attorney, direct contact is prohibited

unless the attorney specifies otherwise

➢ Disputes may be in writing or verbal

➢ Must Report dispute to CRA’s as disputed whether dispute is verbal or in writing- The Brady Decision. Section 807(8) “knows or should know” that a debt is disputed

➢ Must provide verification of the debt if the dispute is received in writing within the 30 day validation period

➢ May provide verification in received after the 30 day validation period.

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➢ Statement of Account (Showing Amount Due)

➢ Copy of Registration (Time/Date) and E-signature

➢ Financial Disclosure Form (Agree to Terms)

➢ Copy of Invoice/Bill

➢ Notes (Appeals, reason for loss of Financial Aid)

➢ Proof of Grades received

➢ Copy of Withdrawal Policy

➢ Prom Note

Debt settlement: the process of negotiating with

creditors to reduce overall debts in exchange for a

lump sum payment. A successful settlement occurs

when the creditor agrees to forgive a percentage of

total account balance. Normally, only unsecured debts

not secured by real assets like homes or autos can be

settled.

➢ Blanket Settlement Authority - Client Authorizes Collection Agency to offer and accept settlements on its behalf within specified parameters set forth in the statement of work.

➢ Usually based on a percentage or formula.

➢ Can be customized for 1st vs. 2nd placements.

➢ Agency does not have to submit individual settlements to client for approval.

➢ Collection agency liable for unauthorized settlements

➢ More efficient as agency only requires internal approval

➢ Some written disputes will also contain a settlement offer within the text.

➢ Do Not accept a settlement in lieu of conducting an investigation on a dispute.

➢ If the dispute is valid, adjust the balance accordingly.

➢ After dispute resolved, consider possible settlement on remaining balance. (Within regular settlement policy)

➢ Internal appeal process may be applied prior to

settlement offer in special circumstances.

➢ Helps to keep the settlement process itself consistent.

➢ Most schools have an appeal board and consistent

policies

➢ Calculate settlement offer, according to stated

parameters after application of appeal.

➢ Avoids appearance of preferential treatment while

allowing for some subjectivity.

When you settle an account, the information will be

updated on your credit report to show that the balance

is zero and that the account has been settled for less

than the full balance owed. However, the account and

history of delinquencies will still remain on the report

for seven years from the original delinquency date.

Anytime you settle an account for less than the full

balance, it is considered negative because the creditor

agreed to take a loss and accept less than the full

amount owed.

➢ Debt collectors should be careful making settlement

offers on debts that are beyond the statute of

limitations as some courts have ruled such offers

could mislead consumers into believing the debt is

judicially enforceable when it is not

➢ Settlement letters on out of statute debt should have

appropriate disclosure advising the borrower that the

account can’t be litigated.

➢ Form 1099-C, Cancellation of Debt

➢https://www.irs.gov/forms-pubs/about-form-1099-c

➢ File this form for each debtor for whom you

canceled $600 or more of a debt owed to you if:

➢you are an applicable financial entity

➢an identifiable event has occurred.

➢ Develop an internal policy for your Institution

➢ Have a written working agreement with your agency

➢ Have clearly established parameters

➢ Consistency will avoid complaints and drive better results

➢ Being Consistent will also avoid wasting time with unreasonable offers

➢ Agency and creditor should both be in strict compliance

➢ Do Not: Advise borrower that the fees are owed to the collection agency and direct the borrower to negotiate with collection agency

➢ Monitor Agency- Conduct periodic settlement audits.

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Fair Credit Reporting Act of 1971

➢15 U.S.C. 1681 et. Seq., Pub. L. 91-508

➢Regulates the collection, dissemination, and use of

consumer information, including consumer credit

information.

➢Along with the FDCPA, it forms the base of consumer

credit rights in the United States.

➢ The FACT Act Furnisher Rules were passed in 2010 by the federal

banking agencies and the FTC and consist of:

➢Accuracy and Integrity Rule requires companies that provide information to

credit bureaus to establish written policies regarding the "accuracy and

integrity" of information furnished to the credit bureaus.

➢Direct Dispute Rule allows consumers to take their disputes directly to the

furnishers of credit report information rather than acting solely through a

credit bureau.

➢ These latest rules impose major new duties for lenders, servicers,

collectors and other financial institutions that report, or "furnish,"

information to credit bureaus.

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➢ Reporting of identifiable information-Effective 9/15/17

➢ Collecting and reporting

➢ Full Name

➢ Address

➢ Social Security Number

➢ Date of Birth

➢ Requirement to have contract or agreement to pay-6/15/16

➢ Do not report debt that did not arise from a contract or agreement to pay

➢ Requirement to have contract or agreement to pay

➢ Including but not limited to fines, tickets, and other

➢ Report a full file monthly-Effective 9/1/16

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▪ Entire section devoted to Cyber

Security Compliance on IFAP‒ GLBA

‒ Red Flags Rule

‒ FERPA

‒ State Privacy Laws (Security Breach Notification Laws)

‒ International Laws

‒ Reporting a Data Breach

https://ifap.ed.gov/eannouncements/Cyber.html

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Red Flag Requirements For Financial Institutions

➢Require financial institutions to develop and implement written

identity theft prevention programs as part of the Fair and Accurate

Credit Transactions Act of 2003

➢ Under the Rule, each institution must develop and implement a written

Identity Theft Prevention Program designed to detect, prevent, and

mitigate identity theft in connection with new or existing accounts

➢ Effective date was January 1, 2008

➢ Mandatory compliance date is June 1, 2010

➢ https://www.ftc.gov/tips-advice/business-center/privacy-and-

security/red-flags-rule

4 Elements:

1. Identity patterns, practices or activities that indicate the

possible existence of identity theft (red flags)

2. Detect Red Flags

3. Respond to detected Red Flags to prevent and mitigate identity

theft

4. Update the Program periodically to reflect changes in risks to

customers and the institution

This initial plan needs to be approved by the institutions

Board of Directors or “Committee”.

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➢ Identity theft disputes generally subject furnishers and debt collectors to a

higher standard

➢ If consumer notifies debt collector in writing within 30 days that debt is the

result of identity theft and refuses to pay, it triggers the debt collector’s duties

under Section 1692g(b) of the FDCPA.

➢ Under the FCRA, the furnisher must not only conduct an investigation under

Section 1681s-2(b) but must also notify relevant parties (i.e., the creditor) that

the information may be the result of identity theft. In addition, upon the

request of the consumer, the debt collector must provide the consumer with all

the information to which the consumer would otherwise be entitled to if the

consumer had disputed the debt. See 15 U.S.C. § 1681m(g)(1)-(2)

➢ It is generally advisable that once the debt collector fulfills its investigation

duties ,to give the consumer some information about what the consumer can

do regarding the alleged identity theft (i.e., file a police report, file a report with

the FTC, get in contact with the creditor, etc.).

➢ Be aware of FCRA Red Flags Rules applicable to service providers of creditors and financial institutions and if applicable, create an identity theft prevention program. See 16 C.F.R. 681.1 (2013).

➢ 6. Be on the lookout for blocked information from the CRA’s resulting from identity theft. The FCRA requires that furnishers have reasonable procedures in place to respond to any notice it receives from a CRA regarding information that stems from identity theft. The furnisher must have procedures in place to prevent blocked information from being refurnished. See 15 U.S.C. § 1681s-2(a)(6).

➢ 7. Similarly, be on the lookout and have reasonable procedures in place for dealing with fraud alerts and active duty alerts issued by the CRA’s . See 15 U.S.C. § 1681c-1.

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➢ Verify Identity

➢ Authenticate Customers

➢ Monitor Transactions

➢ Verify Validity of Address Change

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➢ Monitor Accounts

➢ Contact Customer

➢ Change Passwords

➢ Close and Reopen Accounts

➢ Refuse to Open Accounts

➢ Don’t Bill or Collect on the Account

➢ Notify Law Enforcement

➢ GLBA: a federal law that requires financial institutions to explain how

they share and protect their customers' private information.

➢ To be GLBA compliant, financial institutions must:

➢ Communicate to customers how they share the customers’ sensitive data

➢ Inform customers of their right to opt-out if they prefer that their personal data

not be shared with third parties

➢ Apply specific protections to customers’ private data in accordance with a

written information security plan created by the institution

➢ Take steps to ensure that their affiliates and service providers safeguard customer

information in their care

➢ FTC 16 CFR PART 314 - Standards for Safeguarding Customer

Information (Effective 5/23/03)

➢ FTC seeking comments on proposed amendments (3/5/19)➢ Future FSA Audit Requirement!

➢ https://www.ftc.gov/policy/federal-register-notices/16-cfr-part-314-standards-

safeguarding-customer-information-0

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➢ EU General Data Protection Regulations

➢ Effective May 25th 2018

➢ Even an organization that is not established within the EU

can be caught by GDPR if it processes personal data of data

subjects who are in the Union where the processing activities

are related "to the offering of goods or services”.

➢ Aiming to create more consistent protection of consumer and

personal data across EU nations.

➢ Companies that fail to achieve GDPR compliance are subject

to stiff penalties and fines.

➢ https://gdpr-info.eu/

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➢ The Fair Debt Collection Practices Act states that it is a violation to collect any amount that is not “expressly authorized by the agreement creating the debt or permitted by law.” See 15 U.S.C. 1692f.

➢ Further, state consumer protection statutes and unfair trade practices statutes may implicate creditors (schools) that are not compliant with state requirements regarding the addition of student paid fees.

➢ Agencies and Schools demand compliance in the contracts that govern the relationship.

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➢ Collection Costs – the mutually agreed upon contract

amount that the institution pays the collection agency for

collecting accounts on the school’s behalf.

➢ Institutionally Assessed Fees – The amount charged to a

student subject to an agreement between the student and

the school or the amount permitted by law (i.e. the Higher

Education Act and Perkins Regulations)

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➢ Bradley v Franklin Collection Service, Inc. (2014)➢Eleventh Circuit ruling➢Medical debt where 30% collection cost/fee was added➢Agreement said “I agree to pay all costs of collection . .

. and reasonable collection agency fees”➢Kojetin v CU Recovery, Inc. (2000) – Eighth Circuit

ruling➢Violation of FDCPA to add collection cost/fee based on

percentage of the principal balance

➢Only entitled to actual cost of collection

➢Seeger v AFNI, Inc. (2008) – Seventh Circuit ruling➢Percentage based fee can be appropriate if the parties

agree to it in the contract

Seeger continued….

➢Contractual language stated the following

➢ “You agree to reimburse us the fees of any collection agency, which

may be based on a percentage at a maximum of 33% of the debt,

and all costs and expenses, including reasonable attorneys’ fees, we

incur in such collection efforts.”

➢Bradley’s contract did not specify the collection agency fee

to be charged

➢FDCPA violated when added 30% fee

➢Future?

➢ The Telephone Consumer Protection Act, 47 U.S.C. §227, et seq.

➢ Think about cell phones in 1991

➢ Significant penalties

➢ It is important to understand that the TCPA applies to all entities – not just collection agencies.

➢ NEED EXPRESS CONSENT

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➢The use of predictive dialers to call cell phones.

➢Petition Filed

➢Clarification of the FCC rules, last updated in 2003, with some

other changes in 2008 based on a court decision, regarding the use

of auto-dialers to call cell phones

➢The issue is to clarify the FCC rules and guidance on what a

restricted-use “audio dialer” is and to hopefully convince them to

distinguish predictive dialers tailored and used just for permitted

purposes (not telemarketing, e.g.) from auto-dialers that randomly

dial numbers or dial from lists where there is no pre-established

relationship with the consumer

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TCPA

➢ Automatic Telephone Dialing System- Any dialer that has present or potential capacity to store produce and dial random or sequentially generated numbers.

➢ Actual use of calling equipment not relevant to ATDS determination. Present capacity vs. Potential capacity.

➢ Virtually all modern dialing equipment could meet the FCC’s expansive definition of ATDS. Rotary dial phone only example provided by FCC of equipment that would not meet the definition of ATDS.

➢ Manually dialing calls will not shield TCPA liability if the underlying equipment has potential capacity to meet statutory elements of ATDS.

➢ Equipment which can not dial without human intervention will be determined on a case by case basis.

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Appeals Court Strikes Down Key Parts of TCPA Rule

➢Unanimously set aside parts of the FTC 2015 order interpreting

Telephone Consumer Protection Act’s prohibition on the use of certain

kinds of automated dialing equipment to call wireless telephone numbers

absent advance consent

➢Determining what constitutes an automated telephone dialing system

(ATDS), particularly on whether a device has the capacity to “store or

produce telephone numbers to be called, using a random or sequential

number generator” and “to dial such numbers,” can not be sustained

➢Court also vacated the FCC’s approach on calls to reassigned numbers,

stating that the FCC needed to give some reasoned (and reasonable)

explanation of why its safe harbor stopped at the seemingly arbitrary

point of a single call or message

➢ The Court decision does uphold provisions in the 2015 order that

permit a called party to revoke consent “through any reasonable means,”

as well as the scope of an exemption for time-sensitive health care calls

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➢H.R.1602 - deter criminal robocall violations and

improve enforcement of section 227(b) of the

Communications Act of 1934, and for other

purposes.

➢S.151 “TRACED Act

➢S.2694 - Robocall Enforcement Enhancement

Act of 2018

➢H.R. 1421-HANGUP Act

➢H.R. 946 - Stopping Bad Robo-Calls Act

➢H.R. 423 - Anti-Spoofing Act

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➢ The Telephone Consumer Protection Act➢First & Third party liability

➢Major lawsuit epidemic

➢Significant penalties

➢Per violation liability

➢No cap

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➢ What is it?

➢ Are debt collectors bound by the statute of limitations when requesting payment on an outstanding debt?

➢ Is the debt more or less recoverable once the SOL runs?

➢ How can the creditor assist with the collection of moderate and older debts?

➢ Default Dates➢ SOL and Credit bureau reporting

➢ When does SOL calculation begin➢Date of last payment➢Date of default➢Date payment became due

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➢ States and federal regulators are now using the statute of

limitations to make it increasingly difficult to collect older debt

obligations.

➢ When does the SOL calculation begin?

➢ Date of last payment

➢ Date of default

➢ Date payment became due

➢ The trend wil require specific action to prevent a great deal of

debt from becoming uncollectable.

➢ Sample of restrictive States:

➢ California

➢ Connecticut

➢ Massachusetts

➢ Mississippi

➢ New Mexico

➢ North Carolina

➢ New York State (& NY City)

➢ Wisconsin (State debt is excluded)

STATUTE OF LIMITATIONS (SOL)

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I understand and accept that if I fail to pay my student account bill

or any monies due and owing {Institution Name} by the scheduled

due date, and fail to make acceptable payment arrangements to

bring my account current, {Institution Name} may refer my

delinquent account to a collection agency. I further understand that

I am responsible for paying the collection agency fee which may be

based on a percentage at a maximum of {Institution maximum

percentage} percent of my delinquent account, together with all

costs and expenses, including reasonable attorney’s fees,

necessary for the collection of my delinquent account

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As further part of this agreement, I understand that my delinquent

account may be reported to one or more of the national credit

bureaus. I agree and authorize (Name of School) to use my social

security number for internal and external credit reporting and

collection purposes for all charges incurred against this account for

the duration of my enrollment at (Name of School).

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I understand that when I register for any class at {Institution Name}

or receive any service from {Institution Name} I accept full

responsibility to pay all tuition, fees and other associated costs

assessed as a result of my registration and/or receipt of services. I

further understand and agree that my registration and acceptance

of these terms constitutes a promissory note agreement (i.e., a

financial obligation in the form of an educational loan as defined by

the U.S. Bankruptcy Code at 11 U.S.C. §523(a)(8)) in which

{Institution Name} is providing me educational services, deferring

some or all of my payment obligation for those services, and I

promise to pay for all assessed tuition, fees and other associated

costs by the published or assigned due date

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I authorize {Institution Name} and its agents and contractors to contact me at my current

and any future cellular phone number(s), email address(es) or wireless device(s) regarding

my delinquent student account(s)/loan(s), any other debt I owe to {Institution Name}, or to

receive general information from {Institution Name}. I authorize {Institution Name} and its

agents and contractors to use automated telephone dialing equipment, artificial or pre-

recorded voice or text messages, and personal calls and emails, in their efforts to contact

me. Furthermore, I understand that I may withdraw my consent to call my cellular phone by

submitting my request in writing to{Institutional office or position} or in writing to the

applicable contractor or agent contacting meon behalf of {Institution Name}.

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Method of Communication: I understand and agree that {Institution Name} uses e-mail as an

official method of communication with me, and that therefore I am responsible for reading the

e-mails I receive from {Institution Name} on a timely basis.

Updating Contact Information: I understand and agree that I am responsible for keeping {Institution

Name} records up to date with my current physical addresses, email addresses, and phone

numbers by following the procedure at {Institution website for updating student address/email

address/phone number}. The linked procedure is incorporated herein by reference. Upon leaving

{Institution Name} for any reason, it is my responsibility to provide {Institution Name} with

updated contact information for purposes of continued communication regarding any amounts

that remain due and owing to {Institution Name}.

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•If there is a dispute or problem with this agreement then the University will follow the law of the state of (Name of State)*

*This is irrelevant depending on if the state is Substantive or Procedural-will always honor the shortage one.

Pennsylvania is procedural. So if you have a contract in KY and SOL is 15 years. Debt incurred in KY but Student moves to PA where the SOL is 4 year and there is choice of law provision. The courts would follow the state of PA and SOL would be 4 years.

Understand where the industry is headed and better position your institution to maximize bad debt recovery

Review your policy regarding the critical topics:◦ Disputes◦ Credit Bureau Reporting◦ Identity Theft ◦ Collection Fees◦ Bankruptcy ◦ Telephone Consumer Protection Act◦ Credit Bureau Reporting◦ Choice of Law/Venue Selection◦ Others?

Ensure student acknowledgments are not passive and clearly documented to avoid gaps

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IN CONCLUSION….

CFPB/BOFPwww.consumerfinance.gov

COHEAOwww.coheao.org

ACAhttp://www.acainternational.org

GLBAwww.ftc.gov/privacy/privacyinitiatives/glbact.html

IFAPwww.ifap.ed.gov

RED FLAG RULESwww.ftc.gov/redflagsrule

GDPAhttps://gdpr-info.eu/

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RESOURCES

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