NARCARA 2019 Consumer Engagement- The Law, The Rule and Challenges

1. NARCARA 2019Consumer Engagement-The Law, The Rule and Challenges Rozanne Andersen, Esq., Vice President and Chief Compliance Officer Ontario Systems

2. Disclaimer Ontario Systems is a technology company and provides this presentation solely for general informational and marketing purposes. You should not rely on the content of this material for any other purpose or as specific guidance for your company. Ontario Systems’ advice, services, tools and products described herein do not guarantee compliance with any law or industry standard. You are ultimately responsible for your own company’s actions and compliance efforts and should consult with your own legal and business advisors to obtain specific advice on your company’s compliance, legal and other business needs. Despite Ontario Systems’ efforts to provide current and up-to-date information, you need to recognize that the information contained herein may become outdated quickly and may contain errors and/or other inaccuracies. The presenter and Ontario Systems assume no liability for typographical or other errors contained in the presentation and materials or for changes in the law affecting anything discussed herein.

3. Presenter Rozanne Andersen Vice President, Chief Compliance Officer Ontario Systems Rozanne.andersen@ontariosystems.com, 952.221.6267 Her 30+ years of experience as general counsel, chief lobbyist, executive vice president and CEO of ACA International, as well as a practicing attorney specializing in banking and financial services, have made Rozanne one of the most respected experts in the industry.  Andersen serves as Vice President and Chief Compliance Officer for Ontario Systems, LLC; the leading provider of software, contact management and compliance consulting services to the ARM and healthcare receivables industry. She leads the company's compliance consulting team and supports the innovation of compliance solutions within the Ontario Systems product suite.

4. Facts About Texting • 98% of text messages are read in3 minutes or less(Forbes) • 80% of consumers prefer brands to communicate by text (Ring Central) • 75% of adults prefer offers sent via text(Digital Marketing Magazine) • 78% of consumers desire to have a text conversation with a business(Ring Central) • 93% Smartphone penetration in the U.S.(Ring Central) 7 Bil 7 Billion text messages sent each day in the US & 20 billion worldwide (Forbes) 17% of mobile phone usage in the U.S. are month to month contracts (Ring Central)

5. Electronic Communications Overview

6. Laws that govern electronic communications include: • Fair Debt Collection Practices Act (FDCPA) • Telephone Consumer Protection Act (TCPA) • Electronic Signatures in Global and National Commerce Act (E-SIGN) • CAN SPAM [Impacts Email communications] • Health Insurance Portability and Accountability Act (HIPAA) Regulatory enforcement of these laws is conducted by: • Consumer Financial Protection Bureau (CFPB) • Enforcement actions, Guidance, Supervisory actions • Proposed rules for debt collection • Federal Trade Commission (FTC) • Federal Communications Commission (FCC) • CTIA – The Wireless Association • PCI-DSS

7. Two Types of Consent Required For Electronic Communications [Interactions vs. Delivery] • Informal consent to text – use for basic collection • Consent must comply with TCPA and the FCC Orders (same as for calls using an autodialer or prerecorded messages) NOTE: CTIA is NOT the law, merely industry guidance. • Formal consent to text or email – must use when you wish to substitute digital delivery for U.S. mail delivery when sending a legally required documents or disclosures

8. Emails are not Text Messages - Really • McCarrell v. Offers.com, LLC, United States District Court, Western District of Texas, July 16, 2019 • The TCPA does not regulate email messages, but rather regulates telephone calls and facsimile messages. • McCarrell claims that he received the emails in question on his smartphone. • “The mere fact that emails sent to an email address are read on a smartphone does not bring them within the TCPA. Prukala v. Elle, 11 F.Supp.3d 443, 449 (M.D. Pa. 2014) (holding that emails received on the same device plaintiff used as a telephone did not bring such communications under the TCPA).”

9. Email Communication Basics • Email communications are considered “written communications” • All requirements under federal and state laws that you must adhere to in your consumer letter correspondence sent via USPS must also be included in your consumer email communications • Consent • Email communications used in basic debt collection practices that are not legally required to be delivered in writing require compliance with CAN SPAM (e.g. paid in full, settled in full, subsequent collection notices, general communications) • Must include an opt out per CAN SPAM • Email communications used to provide consumers with legally required disclosures in writing must comply with E-SIGN • Personal vs. Work Email • Debt collectors should have policies, procedures and controls to avoid sending email communications to consumers’ work email addresses without their express consent in order to avoid potential third-party disclosure claims

10. Email Rules of Engagement • To: Name of consumer • From: Make sure you use agency’s true name; consider issues if you use name of debt collector - i.e. third party disclosure issues? • Subject line: Payment, name of creditor, account • Content of email in Body vs. Hyperlink Agreement: Lavallee v. Med-1 • ADA compliance • Hyperlinks the pros and the cons • Opt out per CAN SPAM • Duty to track open rates, bounce backs and spam

11. Text Communications

12. Short Code: A short code is a five-or-six-digit phone number consumers can text message to subscribe to a texting campaign or to take part in a survey Keywords: A keyword is a unique term comprised of letters and/or numbers that consumers can use to communicate with you via your company's short code. Long Code: A long code is a standard phone number that is used to send and receive SMS and MMS messages. In countries that use the North American Numbering Plan (NANP) a long code is 10 digits. Example:Text SETTLEMENTto77464 SETTLEMENT ABC Debt Collector: We have a time sensitive settlement that needs your immediate attention: Contact us at 555-555-5555

13. Business Models Make a Difference

14. Texting - Step 1

15. Texting - Step 2

16. Texting - Step 3

17. Texting - Step 4

18. Texting - Step 5

19. Texting – Steps 6 and 7

20. Texting - Step 8

21. Texting - Step 9

22. Texting - Step 10

23. Approved Methods of Consent to SUBSCRIBE Current Process to Subscribe to Automated Platform – two steps • Step #1 –To receive the Terms and Conditions • The consumer texts the key word “Consent” or “Info” to short code XXXXX • Step #2 – To enroll or subscribe to the text message service and agree to the Terms and Conditions • After the consumer texts Consent or Info, we send them the Terms and Conditions and an invitation to text Yes if they agree to the Terms and Conditions and wish to enroll in the text message service. Alternative Methods: • Example: if the agency trusts the consent passed down from the creditor/provider and flips the flag for consent in the application the consumer will not need to text Consent or Info • Example: if the agency trusts its agents to flip the consent flag in the application the consumer will not need to text Consent or Info • Example: if the IVR/IVA or consumer portal are integrated with the platform, the consent flag is flipped in the application so the consumer will not need to text Consent or Info • In each of the above cases THE CONSUMER MUST STILL TEXT A WORD [TBD] TO AGREE TO THE TERMS AND CONDITIONS AND ENROLL IN THE TEXT MESSSAGE SERVICE.

24. Agent Assisted Option #1 Consent • ABC Debt Collector thanks you for your req to comm via txt. Please read the Terms & Conditions found here {tcurl}. Phone Script • ABC Debt Collector, asks you to txt YES to agree to Terms & Conditions found here {tcurl}. For info call {Cust.Svc#}. Msg&Data rates may apply. • This # is verified to rcv msgs from ABC Debt Collector. # of msgs vary by acct. Msg&DataRatesMayApply To optout reply STOP, HELP for info.

25. Agent Assisted Option #2 • ABC Debt Collector, asks you to txt YES to agree to Terms & Conditions found here {tcurl}. For info call {Cust.Svc#}. Msg&Data rates may apply. Phone Script • This # is verified to rcv msgs from ABC Debt Collector. # of msgs vary by acct. Msg&DataRatesMayApply To optout reply STOP, HELP for info.

26. Agency Portal Self-Service Opt In • ABC Debt Collector, asks you to txt YES to agree to Terms & Conditions found here {tcurl}. For info call {Cust.Svc#}. Msg&Data rates may apply. • This # is verified to rcv msgs from ABC Debt Collector. # of msgs vary by acct. Msg&DataRatesMayApply To optout reply STOP, HELP for info.

27. Keyword Opt In – Validation Notice & Other Letters To communicate with us about your past due account, text INFOto 77464 Two Way Text Que This # is verified to rcv msgs from ABC Debt Collector. # of msgs varies by acct/pref. Msg&Data rates may apply. To optout reply STOP, HELP for info. ABC Debt Collector: Please reply to this msg with the acct number and full name located on this letter to discuss your options by text. Text INFO to 77464

28. Stop Safety Net Remaining TCPA compliant is the cornerstone of the T2C software platform. Customer Replies STOP Message Sent Stop Safety Net blocks delivery STOP Record sent to client Client attempts second delivery

29. Deactivation Logic Deactivation Logic ensures that messages are sent to numbers that have not been deactivated and subsequently recycled by the carrier and given to a new user.

30. Deactivation Logic TCPA oversight requires carriers to report changes in mobile device behavior on a daily basis Bump data SBT Lookup (match) Client active subscribers MOBILE # HAS CHANGED CARRIERS • Signifies porting activity • “Continue” template delivers • Upon response remains an active subscriber MOBILE # REMAINS WITH SAME CARRIER • Signifies deactivation SBT will manage deactivation logic protocol for client SBT will provide daily deactivation report to client

31. Deactivation Logic – Ported vs Deactivated

32. Cadence & Tone

33. CADENCE BY CONTACT METHOD PAST DUE MESSAGING – PRE CHARGE OFF POST CHARGE OFF PAST DUE MESSAGING – EARLY TO MID STAGE PROACTIVE MESSAGE before Due Date 0 DUE DATE Loan due date Reminder text suggest -5 -3 -1 15 60 30 45 75 90 105 120 Recommended Text Cadence -3 -1 1 4 7 10 13 17 23 27 29 34 40 43 46 50 57 61 68 71 76 80 85 90 97 104 111 115 Email 9 14 20 31 45 66 94 Call 2 6 11 15 24 28 30 33 38 41 47 49 53 65 70 77 84 90 100 119 Letter 15 45 60 115 0 DUE DATE This timeline shifts for 3rd party – Start date and ‘Early to mid stage moves

34. LaVallee v. Med – 1 Solutions – Impact on Email Communications and E-Sign Act Lavallee v. Med-1 Solutions, LLC (Case No. 1-15-cv-1922, U.S.D.C., Southern District of Indiana). Court: Validation Notice Sent Via Email Requiring Consumer to Click a Link to Open a “Secure Package” Is Not “Sending” a Validation Notice Under FDCPA for two reasons: • Link to letter was successfully used to open the letter • Defendant knew plaintiff never opened the letter • Lacked E-Sign compliance • Case was appealed. CFPB filed Amicus Brief • August 8, 2019 decision rendered by 7th Circuit US Court of Appeals

35. LaVallee v. Med – 1 Solutions – 7th Circuit Decision • The court considered if highly secure process used by Med 1 to “send” the validation notice to the plaintiff via email satisfied the compliance requirements of the FDCPA regarding the duty to send the notice • Court did not opine on E-Sign • Appeal was based on Med-1’s contention that its emails were initial communications that contained the required disclosures. • Court held the emails do not qualify under the Act’s definition of “communication” because they did not “convey[ ] ... information regarding a debt.” 15 U.S.C. § 1692a(2). Nor did the emails “contain” the statutorily mandated disclosures. § 1692g(a). • At most the emails provided a means to access the disclosures via a multistep online process. Because Med-1 violated § 1692g(a), the judge was right to enter judgment for Lavallee.

36. The E-Sign Act- What is it, and Why We Need to Comply • The E-Sign Act provides parties with the ability to provide an electronic signature for documents that would otherwise have to be signed with ink and paper methods. It is also the law Congress passed to make clear digital documents and properly executed contracts have the same force and effect as paper and pen. • E-Sign also contains an often overlooked section which addresses when and how one may substitute the digital delivery of a consumer disclosure for traditional types of delivery such as hand delivery, certified mail or the U.S. postal service.

37. E-Sign Act – The Law c) Consumer Disclosures.--(1) Consent to electronic records.- Notwithstanding subsection (a), if a statute, regulation, or other rule of law requires that information relating to a transaction or transactionsin or affecting interstate or foreign commerce be provided or made available to a consumerin writing, the use of an electronic record to provide or make available (whichever [[Page 114 STAT. 465]] is required) such information satisfies the requirement that such information be in writing if – (A)the consumer has affirmatively consented to such use and has not withdrawn such consent; (B) the consumer, prior to consenting, isprovided with a clear and conspicuous statementpertaining to the consumer’s rights and as further provided in the Electronic Signatures in Global and National Commerce Act (E-Sign).

38. E-Sign Act – The Law • Prior to obtaining consumer consent to send a information mandated by statute or regulation: • Indicate whether customers have a right or option to receive information on paper • Identify whether the consent relates to a particular transaction • Explain consumer’s right to withdraw consent, provide the procedures to withdraw consent and the consequences of withdrawing consent re: fees, termination of the relationship • Describe the procedures the consumer may use to update their contact information • Outline the hardware and software requirements for accessing and retaining records • Explain how to obtain paper disclosures after consent has been given and describe any associated fees Consumers must also consent electronically, or electronically confirm consent, in a manner that reasonably demonstrates their ability to receive or access the information electronically.

39. E-Sign Act and Impact on Validation Notice – 1692 g § 1692. Validation of debts • Notice of debt; contents Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing – • (1) the amount of the debt; • (2) the name of the creditor to whom the debt is owed; • (3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector; • (4) a statement that if the consumer notifies the debt collector in writing within the thirty day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and • (5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.

40. Impact of E-Sign on Post Dated Checks § 15 U.S. Code § 1692f . Unfair practices • Notice of debt; contents A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section: • (1) The collection of any amount (including any interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or permitted by law. • (2) The acceptance by a debt collector from any person of a check or other payment instrument postdated by more than five days unless such person is notified in writingof the debt collector's intent to deposit such check or instrument not more than ten nor less than three business days prior to such deposit.

41. E-Sign and The Electronic Funds Transfer Act VIII. Other Requirements Preauthorized Transfers—12 CFR 1005.10 • Preauthorized transfers from a consumer’s account may only be authorized by the consumer in writing and signed or similarly authenticated by the consumer (12 CFR 1005.10(b)). • Signed, written authorizations may be provided electronically, subject to the E-Sign Act (Comment 10(b)-5). • In all cases, the party that obtains the authorization from the consumer must provide a copy to the consumer.

42. Sample Script – Texting and the E-Sign Act Providing consent to Receive Legal Documents and Disclosures Electronically requires that we follow the Electronic Signatures Act (E-Sign). To ask for this type of consent we are required to provide additional language. • Agent: Thank you for setting up the payment arrangement. Would you like me to text you a copy of the authorization and the post-dated payment reminders? • Consumer: Yes, sounds great. • Agent:Since these kinds of documents include important disclosures and information about your rights, I need your consent to send them to you by text and a link rather than by US mail. • Consumer: Okay • Agent: Please listen to the following: (Note: this could be accomplished in a prerecorded script the agent plays).

43. Sample Script - Texting and the E-Sign Act Consent to receive legal documents and disclosures electronically means you are providing consent for us to send you legally required information about any of your Active Accounts [insert appropriate descriptors here] by text message including secure links to our company’s website using your mobile phone number. You understand you have a right to receive this information in paper form at no charge, withdraw your consent, update your contact information at any time by calling us at [phone number of company or provider] during normal business hours of 8:00 a.m. to 6:00 p.m. Monday through Saturday or by visiting our website at [insert link to appropriate web page] or sending a text message using the keyword revoke to us at XXXXX. In order to properly give us your consent to receive information, legal documents and disclosures electronically you will need access to a nonwork mobile number which can send and receive text messages including hyperlinks to url addresses [list hardware and software requirements here]. To make sure the information and documents and disclosures will properly reach you, please reply to the text message from our company by simply texting the keyword ESIGN to our company at xxxxx. Text and message rates may apply. • Third-Party Debt Collectors: Don’t forget to include this is a communication from a debt collector.

44. Sample Script – E-Mail and the E-Sign Act Consent to receive legal documents and disclosures electronically means you are providing consent for us to send you legally required information about any of your Active Accounts [insert appropriate descriptors here] by email message including secure links to our company’s website using your mobile phone number. You understand you have a right to receive this information in paper form at no charge, withdraw your consent, update your contact information at any time by calling us at [phone number of company or provider] during normal business hours of 8:00 a.m. to 6:00 p.m. Monday through Saturday or by visiting our website at [insert link to appropriate web page]. In order to properly give us your consent to receive information, legal documents and disclosures electronically you will need access to a nonwork email address with [list hardware and software requirements here]. To make sure the information and documents and disclosures will properly reach you, please reply to the email message from our company by simply writing I agree in the body of the email. • Third-Party Debt Collectors: Don’t forget to include this is a communication from a debt collector.

45. Special Thanks • One of the highlights of my career most certainly included my direct interactions with the members of NACARA. Thank you for inviting me back. I hope my presentation today has provided you with additional insight into the world of digital communications as that term is used in a third party debt collection context. If you would like to visit with me about any of the information I shared or questions you may have about digital communications and the law, do not hesitate to contact me at Rozanne.Andersen@ontariosystems.com.