Hot Legal Topics in the Debt Settlement Industry: The Perfect Storm of Risk and Opportunity

Transcription

1 Hot Legal Topics i the Debt Settlemet Idustry: The Perfect Storm of Risk ad Opportuity Uited States Orgaizatios for Bakruptcy Alteratives (USOBA) Summer Coferece Jue 8, 2009, 1 2:30 pm Hyatt Regecy Chicago, Chicago, IL 2008 Veable LLP 1 Jeffrey S. Teebaum, Esq. Joatha L. Pompa, Esq. Veable LLP, Washigto, D.C.

2 IMPORTANT INFORMATION ABOUT THIS PRESENTATION This presetatio is for geeral iformatioal purposes oly ad does ot represet ad is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios. This presetatio does ot represet ay udertakig to keep recipiets advised as to all or ay relevat legal developmets. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

3 Itroductio FTC ad Cogress Target the Debt Settlemet Idustry Risk ad Opportuity How We Got Here Cogressioal move to Ehace FTC Eforcemet ad Oversight of Debt Settlemet Idustry Cosumer Credit ad Debt Protectio Act (H.R. 2309) Other Key Federal Developmets Quick Review of State Debt Adjustig Law Developmets Ivestigatios, Law Eforcemet Actios ad Private Lawsuits Questios ad Aswers This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

4 The FTC ad Cogress Target the Debt Settlemet Idustry This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

5 How We Got Here: Federal Trade Commissio Workshop o Debt Settlemet This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

6 FTC Overview This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

7 Federal Trade Commissio Act FTC pursues deceptive practices uder Federal Trade Commissio Act ( FTC Act ), 15 U.S.C. 45 et seq.: Eforcemet agaist ufair or deceptive practices Sectio 5 gives the Commissio broad authority to prohibit ufair or deceptive acts or practices Sectio 13(b) authorizes FTC to file suit i Uited States District Court to ejoi ay act or practice that is i violatio of ay provisio of law eforced by the FTC Not required to prove actual deceptio Wide array of remedies: civil pealties, ijuctios, restitutio, corrective advertisig Issues Policy Statemets ad Guides for specific idustries ad advertisig practices Not official regulatios but represet FTC s views of certai practices FTC has issued a Cosumer Alert for debt settlemet Kee Deep i Debt This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

8 Federal Trade Commissio Act Sectio 5 Prohibits: Ufair or deceptive acts or practices i or affectig commerce. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

9 Deceptio Stadard A represetatio, omissio, or practice is deceptive if it is likely to: Mislead cosumers; ad Affect cosumers behavior or decisios about the product or service. Ads must be truthful, ot misleadig, ad substatiated. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

10 Ufairess Stadard A act or practice is ufair if the ijury it causes, or is likely to cause, is: Substatial; Not outweighed by other beefits; ad Not reasoably avoidable. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

11 Other FTC Related Statutes ad Regulatios Credit Repair Orgaizatios Act (arrower tha state credit repair statues, but more difficult to comply with). Telephoe Cosumer Protectio Act Telemarketig Sales Rule Disclosure Credit Repair Prohibitio o Fees Debit Requiremets Gramm-Leach-Bliley Act Privacy Rule Safeguards Rule CAN-SPAM Act Fax This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

12 Federal Trade Commissio Workshop: Sept. 25, 2008 Pael 1: Overview of the ForProfit Debt Settlemet Idustry: Uderstadig the Origis of the Idustry Pael 2: The For-Profit Debt Settlemet Idustry Today: Perspectives o Curret Idustry Treds ad Practices Pael 3: Protectig the Cosumer: a Discussio of Cosumer Protectio Challeges Facig the For-Profit Debt Settlemet Idustry Pael 4: The Future of the ForProfit Debt Settlemet Idustry: Where Will the Idustry Go from Here This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

13 Cogressioal Move to Ehace FTC Oversight ad Eforcemet of Cosumer Credit ad Debt; Debt Settlemet Services Targeted This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

14 U.S. Seate Committee o Commerce, Sciece, ad Trasportatio Hearig (Feb. 26, 2009) To ehace the FTC s ability to protect cosumers i the fiacial services marketplace, the testimoy made the followig recommedatios: Permit the FTC to employ otice ad commet rulemakig procedures to declare acts ad practices relatig to fiacial services to be ufair or deceptive i violatio of the FTC Act; Authorize the FTC to obtai civil pealties for ufair or deceptive acts ad practices related to fiacial services, ad authorize the agecy to brig suit i federal court to obtai civil pealties; Authorize the FTC to issue rules to implemet the Fair Debt Collectio Practices Act; ad Provide additioal resources to assist the FTC i icreasig its law eforcemet activities related to cosumer fiacial services ad expadig its critical empirical work o the efficacy of disclosures. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

15 U.S. House Subcommittee o Commerce, Trade ad Cosumer Protectio of the Committee o Eergy ad Commerce (March 24, 2009) FTC says: The historic levels of cosumer debt ecessarily have affected the services CCAs ca provide. The icreased demad for debt relief optios resulted i the recet growth of for profit debt settlemet compaies. 14 Eforcemet Actios (About half agaist settlemet compaies) FTC Requests expaded ad expedited rulemakig authority ad civil pealties. Chage from Maguso-Moss Warraty Act Cosumer redress whe the Commissio is able to demostrate that the respodet had egaged i dishoest or fraudulet coduct. Civil pealties i the evet that Violatio of rules from special rulemakig procedures described i the Act or if the respodet committed a kowig violatio of a outstadig decree agaist a third party (by egagig i the coduct proscribed i the decree.) This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

16 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

17 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

18 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

19 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

20 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

21 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

22 FTC Commissioer Rosch Speech o Cosumer Protectio ad the Debt Settlemet Idustry (April 2, 2009) FTC Commissioer J. Thomas Rosch Recommedatios for the Debt Settlemet Idustry limit their performace claims to those they ca adequately substatiate ; ot misrepreset the beefits of debt settlemet ; disclose, clearly ad cospicuously, the egative impact that participatio i a program may have o a cosumer s credit score, ad how log that impact may liger. This disclosure should ot be made oly i the writte cotract, but i the ad itself ; ad if a debt settlemet firm promises to refud debt settlemet service fees to cosumers if their debt settlemet egotiatios are usuccessful, the firm must hoor that promise. Cocers about advace fees Prior Writte Coset for Disbursemets Supports Self-Regulatio This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

23 Proposed Cosumer Credit ad Debt Protectio Act, H.R Itroduced - May 7, 2009 (Rep. Bobby Rush (D-IL)) Referred to Subcommittee o Commerce, Trade ad Cosumer Protectio Subcommittee Hearig May 12, 2009 Markup - Jue 3, 2009 Next Full Commerce Committee This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

24 Proposed Cosumer Credit ad Debt Protectio Act, H.R Itroduced - May 7, 2009 (Rep. Bobby Rush (D-IL)) Referred to Subcommittee o Commerce, Trade ad Cosumer Protectio Subcommittee Hearig May 12, 2009 Markup - Jue 3, 2009 Next Full Commerce Committee This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

25 What to Expect if there is a FTC Rulemakig I order to esure success, the idustry must have ready aswers to key questios early i the process. Based o the FTC s Curret Rulemakig for Foreclosure Cosultats Topics to Expect: Empirical Data Need for a FTC Rule Scope of Covered Practices Scope of Covered Etities? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

26 1. Empirical Data Questios to Expect from the FTC What empirical data are available cocerig the ature, extet, ad impact of the debt settlemet services idustry? What busiess models are used to provide debt settlemet services services? Please idetify ad describe ay such busiess models ad their impact o cosumers ad competitio. What are the distictios betwee differet models of providig debt settlemet services (e.g., free versus fee-for-service, full balace vs. less-thafull balace, etc.)? What are the costs ad beefits of various debt settlemet services ad related services? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios. 26? 2009 Veable LLP

27 1. Empirical Data cot d. Questios to Expect from the FTC What roles do creditors ad debt collectors play i the debt settlemet services idustry? What are the costs ad beefits of their coduct i the cotext of debt settlemet services services? Do the practices of creditors ad debt collectors preset cosumer protectio cocers? If so, how are these cocers the same as or differet from those raised by third-party debt settlemet services etities? What empirical data are available cocerig the performace of debt settlemet services etities i obtaiig promised results? Please idetify ay such data (broke dow by busiess model, if possible) used to provide debt settlemet services, icludig but ot limited to data addressig the followig: 1. The percetage or proportio of cosumers erolled i various debt settlemet services who successfully complete the program. 2. For the cosumers who graduate, what is the percetage who, after successfully completig the program, remai curret o their usecured credit paymets for a substatial period of time (e.g., six moths, oe year, or two years).? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

28 2. Need for FTC Rule - Questios to Expect from the FTC Should the FTC promulgate a rule to address these services? Why or why ot? State Law Eforcemet Actios ad State Debt Adjustig Laws FTC Law Eforcemet Actios What should be i a FTC Rule? Disclosures Right to Rescid? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

29 2. Need for FTC Rule - Fees for Services - Questios to Expect from the FTC: Should the Commissio address i a proposed FTC rule ay fee or refuds practices of providers of debt settlemet services? If so, what practices should be addressed, how they should be addressed, ad why? Should the Commissio ba the paymet of advace fees for debt settlemet services i a proposed FTC rule? If so, why or why ot? What effect, if ay, would a advace fee ba have o the willigess or ability of debt settlemet services providers to do busiess? Should the Commissio impose fee restrictios i a proposed FTC rule other tha a ba o the advace fees that providers of debt settlemet services receive? If so, what restrictios should be imposed ad why? Would these restrictios prevet or mitigate the potetial harm caused by paymet of these fees? To what extet might the possible harm from advace fees be preveted or mitigated by requirig providers to make specific disclosures regardig the timig, amout, or allocatio of fees? To what extet might such harm be preveted or mitigated by requirig providers to make more geeral disclosures regardig the ature ad material restrictios of their services (e.g., the disclosures regardig the likelihood of success, timig of services or egotiatios with creditors ad debt collectors, refud restrictios, or ay potetially egative ramificatios of usig the service)?? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

30 3. Scope of Covered Practices Questios to Expect from the FTC: Should coduct by debt settlemet service providers or advertisers that the FTC has challeged as ufair or deceptive i violatio of Sectio 5 of the FTC Act i its law eforcemet actios be icorporated ito a proposed FTC rule? If so, what coduct should be icluded, how should it be addressed, ad why?? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

31 Scope of Covered Practices cot d. Questios to Expect from the FTC Some states have debt adjustig laws which, i whole or i part, oly apply to mothly repaymet plas where a compay receives fuds ad distributes those fuds to creditors. For what type of services should a proposed FTC rule protect cosumers? Should it apply oly to debt settlemet services that do t touch or cotrol cosumer fuds destied for creditors, for all debt relief services? Why? Please idetify ay other state restrictios or challeged coduct which should (or should ot) be addressed i a proposed FTC rule, ad explai why. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios. 31? 2009 Veable LLP

32 4. Scope of Covered Etities Questios to Expect from the FTC Geerally, a FTC proposed rule would ot cover baks, thrifts, federal credit uios, ad o-profits. To what extet do these types of etities provide or advertise debt settlemet services? To what extet do these etities compete with etities that a FTC proposed rule would cover ad what effect would a FTC proposed rule have o such competitio?? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

33 Covered Etities cot d. - Questios to Expect from the FTC May states have exempted attoreys from laws (e.g., state debt adjustig laws) which regulate the coduct of providers ad advertisers of debt settlemet services. What are the costs ad beefits of exemptig attoreys from these laws? What has bee the effect of such exemptios o competitio betwee attoreys ad o-attoreys i providig or advertisig debt settlemet services? Should a FTC proposed rule iclude a exemptio for attoreys or ay other class of persos or etities? Why or why ot?? This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

34 Other Federal Trade Commissio Developmets Updates o the FTC Red Flags Rule Release of New FTC Debt Calculator New Advertisig Guidace - Testimoials This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

35 FTC Red Flags Rule Guidace Available at: crosites/redflagsrule/idex.sht ml The FTC Red Flags Rule requires may busiesses ad orgaizatios to implemet a writte Idetity Theft Prevetio Program desiged to detect the warig sigs or "red flags" of idetity theft i their dayto-day operatios. Are you covered by the Red Flags Rule? New Deadlie for FTC regulated cover etities: August 1, This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

36 This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

37 Proposed Revisios to the FTC Guides Cocerig the Use of Edorsemets ad Testimoials i Advertisig This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

38 Backgroud o FTC Guides for Edorsemets ad Testimoials November 28, 2008: Notice ad Request for Commet o Proposed Chages to the Guides Cocerig the Use of Edorsemets ad Testimoials i Advertisig ( Guides ). Iformal but very importat statemets of policy by the FTC i the field of advertisig. Sigificat proposed chages affect: (1) The use of cosumer ad expert edorsemets; ad (2) The ability of advertisers to use ew media edorsemets such as bloggers ad olie message boards. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

39 The Existig FTC Guides Major rules of the road goverig how ad where testimoials/edorsemets ca be employed by advertisers. Must reflect the hoest opiios, fidigs, beliefs or experiece of the edorser. May ot cotai ay represetatios that would be deceptive or could ot be substatiated if made directly by the advertiser. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

40 Special Rules for Cosumer Edorsemets Cosumer Edorsemets are iterpreted as represetig that the edorser s experiece is represetative of what cosumers will geerally achieve. If the advertiser caot substatiate that the edorser s experiece is typical, the advertisemet must clearly ad cospicuously either: (a) disclose what the geerally expected performace would be i the depicted circumstaces; or (b) clarify the limited applicability of the edorser s experiece. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

41 Summary of Key Proposed Chages to FTC Testimoial Guides Expaded Defiitio of Edorsemets Expaded Liability Uder the Commissio s proposed chages, edorsers, as well as marketers, may be liable for statemets made i the course of their edorsemet. The Death of the Disclaimer A statemet by a cosumer about his or her experiece with the product is deemed to be a represetatio that other users of the product ca expect the same experiece. May marketers do ot have the facts ecessary to support such a claim so they merely state that the experiece of the testimoial is uique ad that Your Experiece Will Vary. Disclosure of Coectios: The New Frotier This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

42 Testimoials (cot d) The most importat questios are: (1) What is goig to happe? ad (2) Whe will it happe? At this poit, o oe kows. The Commissio is aalyzig the commets ad it would be surprisig if aythig came out before the Fall ad perhaps the begiig of ext year. It may take eve loger. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

43 Quick Update o State Debt Adjustig Law ad other Developmets Texas Utah (amedmets to UDMSA) Maie Missouri (pedig sigature) Colorado (UDMSA eforcemet) Califoria Iowa Nevada Teessee Motaa New York This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

44 Ivestigatios, Law Eforcemet Actios ad Private Lawsuits This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

45 Ivestigatios, Law Eforcemet Actios ad Private Lawsuits (ad Class Actios) FTC Act ad Related Statutes (e.g., CROA) State Cosumer Protectio Laws State Credit Services Orgaizatio Acts State Debt Adjustig Laws Other State Marketig ad Security Breach Laws (e.g., ) Cotract Actios (Arbitratio Provisios) Private Lawsuits May Iclude CROA ad RICO claims, amog other federal statutes. This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

46 Private Lawsuits ad Class Actios Where do they come from? Federal Credit Repair Orgaizatio Act State Credit Services Orgaizatio Acts State Debt Adjustig Laws (e.g., GA, SC, UDMSA states, ad others). Other State Marketig ad Security Breach Laws (e.g., ) Cotract Actios (Arbitratio Provisios) Tort Law (Creditor Lawsuits) Racketeer Iflueced ad Corrupt Orgaizatios Act (RICO) (treble damages) This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

47 Practical Tips to Help Avoid Eforcemet Actios ad Lawsuits ad o How to Fight Back Whe Ivestigated or Sued This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

48 Practical Tips to Help Avoid Law Eforcemet Actios ad Private Lawsuits Comply with Federal ad State Cosumer Protectio Laws. Evaluate ad comply with each state s debt adjustig laws (based o residece of cosumer) ad all other applicable laws (icludig tax requiremets). Obtai all required authorizatios, liceses ad registratios (e.g., debt adjustig, telemarketig, authority to do busiess, etc.). Trai Maagemet ad Staff Appoit a Compliace Officer Private Lawsuits - Cosider utilizatio of a arbitratio provisio that, amog various poits, (1) avoids a form cotract ad small, illegible prit that is difficult to read, (2) esures that cosumer expressly agrees to the arbitratio clause, (3) esures that clause is ot cost prohibitive. More This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

49 Get Iformed ad Get Help Traiig is the key Become familiar with state ad federal laws that could affect your busiess Idustry associatios ad private firms provide resources to help keep you iformed Fid someoe who ca help you make compliace with applicable rules part of your busiess Be Prepared This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

50 Develop a Compliace Pla Plas will vary based o the eeds of your compay Certai elemets are uiversal Classificatio of Services (what is your busiess model?) System for Screeig Customers System for Assessig Red Flags State Compliace Requiremets Advertisig ad Marketig Review Systems Reviews Traiig Recordkeepig This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

51 Fial Thoughts Be prepared for potetial federal regulatio Support Efforts to Develop Empirical Data Self Regulatio Idividual Compay Performace Govermet Affairs Do t be Pey-Wise ad Poud Foolish Customer satisfactio lesses, but does ot elimiate, eforcemet risk. Pealties for violatig federal ad state laws applicable to debt settlemet ca be severe, icludig: Civil/Admiistrative pealties; Crimial pealties, icludig fies ad jail time; Bas from idustry ad impedimet to licesures. Asset freezes ad forfeitures. A compliat idustry sets the stage for future legislative accomplishmets This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP

52 QUESTIONS AND DISCUSSION Jeffrey S. Teebaum, Esq. Joatha L. Pompa, Esq. (202) (202) Veable LLP 575 7th Street, N.W. Washigto, DC Veable To view Veable s idex of articles ad PowerPoit presetatios o debt settlemet idustry legal topics, see This presetatio is ot iteded to provide legal advice or opiio ad should ot be relied o as such. Legal advice ca oly be provided i respose to specific fact situatios Veable LLP