Federal Trade Commission

1. Federal Trade Commission Federal Debt Collection Update Tom Carter, National Coordinator FTC’s Collection Protection Group Note: The views expressed in this presentation are my own and do not necessarily reflect those of FTC, its staff, or any individual Commissioner. NACARA Conference Charleston, SC / October 15, 2018

2. Overview of the FTC 1

3. Federal Trade Commission = For The Consumer Independent federal agency of – lawyers, investigators, and economists Washington, D.C. and seven regional offices Five Commissioners appointed by President to seven-year staggered terms No more than three from one party

4. Five NewFederal Trade Commissioners: Joseph J. Simons, Chairman Noah Joshua Phillips Rohit Chopra Rebecca Kelly Slaughter Christine S. Wilson

5. New Bureau Directors in Both Enforcement Bureaus • Consumer Protection • Competition

6. Seven Regional Offices

7. Enforcement Authority The FTC was created by act of congress in 1914 – the Federal Trade Commission Act Primary Enforcement authority is found in Section 5 of the FTC Act

8. FTC

9. Some Debt/Credit Statutes Enforced: • Fair Debt Collection Practices Act • Truth in Lending Act • Military Lending Act • Fair Credit Reporting Act • Fair Credit Billing Act • Equal Credit Opportunity Act

10. FTC & Debt Collection 2

11. More Debt Collection Complaints than any other industry

12. Fair Debt Collection Practices Act15 U.S.C. §§ 1692-1692p

13. Under the FDCPADebt Collectors MayNot . . . • Harass, oppress, or abuse a debtor or any third parties they contact; • Call before 8am or after 9pm (unless given permission); • Call at work if they have reason to know that the employer does not permit such calls; • Call at a time that is known to be inconvenient (includes calls to the workplace if told not to); or • Disclose the existence of a debt to anyone other then the debtor (or their spouse).

14. Debt Collectors MayNot . . . Make False Statements. Debtcollectorsmaynotdeceive consumers while attempting to collectadebt. For example,theymay not: ●falselyclaimto be attorneys or governmentrepresentatives; ●falselyclaimthatthe consumer hascommittedacrime; ● misrepresent that the consumer will be arrested or imprisoned; ● misrepresent that the consumer will be sued; ● misrepresent that property will be seized or funds garnished; ● misrepresenttheamountowed; or ● threaten to, or communicate, false credit information. False statements also violate the FTC Act

15. TwoTypesof FTC Debt Collection Investigations • Civil Investigative Demand --Require Production of: • Documents (letters, scripts, training manuals, call notes) • Audio files (collection calls) • Employee records (monitoring reports & disciplinary actions, contact information to interview former employees) • Company witnesses for Investigational Hearings • Ex Parte Investigation: • Interview consumer complainants • Obtain consumer sworn declarations • Obtain consumer records (collection letters, voicemail messages) • Informants

16. TwoTypesof FTC Enforcement Actions Dept. of Justice Filed • Permanent Injunctions • Civil Penalties • FTC Filed • Permanent Injunctions & Bans • Disgorgement & consumer restitution • Ex Parte TROs • Freeze corporate & individual assets • Immediate access to records • Appointment of receivers

17. Debt Collection Continuesto be a Priority for the FTC In 2016: • Filed or resolved 12 debt collection cases against 61 defendants • Secured successful summary judgment decisions in three litigated matters • Obtained nearly $70 million in judgments • Banned 44companies and individuals from the debt collection industry

18. In 2017: • Filed or resolved 10 cases against 42 defendants • Obtained more than $64 million in judgments • Banned 13companies and individuals from the debt collection industry So far in 2018: • Filed or resolved 4 debt collection cases against 25 defendants • Obtained more than $34 million in judgments • Banned 21 companies and individuals from the debt collection industry

19. FTC Debt Collection Enforcement Priorities 3

20. No Change in Debt CollectionEnforcement Priorities • Egregious collection practices • Filing joint actions with state & federal partners • Emerging technologies • Payday loan & student loan debt collection

21. EgregiousCollection Practices • Phantom Debt Collection – 7 of the last 11 complaints filed involved fake debts • False Threats – particularly threats of suit, wage garnishment, arrest & imprisonment • 3rd-party disclosure – to employers, neighbors, & roommates • Bogus Fees – fake attorney’s fees, interest charges, & other unauthorized charges • Typically file such cases ex parte and often seek a debt collection bans • Seek restitution to consumers for collection of fake debts & unauthorized charges

22. FTC v. Hylan Asset Management, LLC

23. FTC v. Global Processing Solutions

24. FTC v. Vantage Point Services, LLC, et al.

25. Joint Actions with Partners • Filled at least 5 federal court complaints jointly with the New York Attorney General • Filed 2 cases with the Illinois Attorney General • Also filed jointly with CFPB • Brings greater resources to the cases • Provides local experience where filed • Produced very successful results

26. Emerging Technologies Under FDCPA collectors can use text messages or social mediato collect debts, BUTthey: • Can’t be deceptive. FTC has challenged deceptive “door openers” – texts that used false pretenses to get consumers to call back. FTC v. The Primary Group challenged texts like: YOUR PAYMENT DECLINED WITH CARD ****-****-****-5463 . . . CALL 866.256.2117 IMMEDIATELY.

27. Emerging Technologies Text messages and social media used to collect debts also: • Must have appropriate disclosures. The initial communication must contain “Mini-Miranda” warnings and subsequent communications must disclose it’s from a debt collector. FTC v. National Attorney Collection Services made clear that there is no “But that’s tough to do in a text . . .” defense under the law. • Can’t disclose a debt to third parties. Debt-related posts on Facebook, Twitter, or Tumblr can be viewed by others. Facebook “friend request” is likely actionable as 3rd party disclosure, deception (not really a “friend”), or lacking necessary disclosures.

28. Payday & Student Loan Collection • USA v. GC SERVICES: • Alleged that GC Services unlawfully disclosed student loan debts to third parties • Obtained a $700,000 civil penalty settlement • Order also precludes voicemail messages, unless: • Machine’s recorded message names only the debtor; • Debtor previously confirmed only they can access the messages; or • Debtor has consented to receiving messages at that number.

29. Ways to Work Together to Combat Illegal Debt Collection 4

30. #1 Use FTC’s Consumer Sentinel Complaint Database • Consumer Sentinel: A Law Enforcement Tool A unique investigative cyber tool that provides members with access to a national database of millions of Consumer Fraud complaints • Dozens of contributors, including BBB, 20 State Attorneys General, & Postal Inspection Service • Sharing information can make law & regulatory enforcement even more effective • Available to law & regulatory enforcement agencies – over 2100 members

31. Law Enforcement Use of Consumer Sentinel • NOW AVAILABLE –All consumer complaints filed with the FTC about financial issues, such as credit reports, debt collection, financial institutions, and lending • Free to Register – Call Help Desk at 877–701–9595 or go to https://register.consumersentinel.gov

32. Join Consumer Sentinel: • Search Complaints by product or violation code • Search Complaints by consumer’s state • Search Complaints by company’s location • Check complaints before conducting an exam • Check complaints against license applicants • Check complaints against licensees to help target companies for exam

33. #2 SubmitComplaintsto the FTC • Submit complaints to Consumer Sentinel so others can benefit: • Encourage consumers to file complaints • File complaints on behalf of consumers (one at a time) • Online: ftc.gov/complaint • By phone: Toll free @ (877) FTC-HELP (877) 382-4357 • Data Dump: Work with our IT department to periodically download all your complaints to Consumer Sentinel

34. Submit Complaints to the: Consumer FinancialProtection Bureau • Online: consumerfinance.gov/complaint • By phone: Toll free: (855) 411-CFPB (855) 411-2372 • By mail: Consumer Financial Protection Bureau P.O. Box 4503 Iowa City, Iowa 52244

35. #3FTC Just Joined the Nationwide Multistate Licensing System & Registry (NMLS) • Regulators reviewing license or registration applications or conducting audits can check NMLS to: • Find companies that the FTC has obtained orders against • Obtain a list of FTC Banned Debt Collectors Non NMLS members can find banned collectors here: ftc.gov/enforcement/cases-proceedings/banned-debt-collectors

36. #4 Refer Consumers to the FTC for Help • Consumer Education • @ FTC.gov • Toll-free Assistance Line • @ 877-FTC-HELP • Assistance for ID Theft Victims • @ IdentityTheft.gov We can help you help your victims

37. #5 Use FTC Brochures FTC consumer education materials are great because: • they’re FREE • they can be ordered in BULKgo to bulkorder.ftc.gov • they’re in the public domain, so you can: • use as much as you want • put on your own label/logo on them We can help you educate consumers

38. #6 Refer Cases to the FTC • If you discover companies selling or collecting FAKE DEBTS • If you find DECEPTIVE SCRIPTS (e.g. false threats of arrest) • If you see TRAINING MANUALS (with clear violations of the FDCPA/FTC Act) • If you discover other INTENTIONAL systematic deception

39. #7 FTC Joint & Parallel Investigations • Do a joint investigation & federal court filing (We’ve done joint debt collection cases with NY AG, IL AG, & CFPB) • Do a parallel investigation & take a separate action (We can share information with most agencies that sign a confidentiality and data security agreement)

40. #8 Join The FTC’s Collection Protection Group • Participants include FTC, CFPB, DOJ, 47 state Attorneys General, 17state regulatory agencies, and a number of local authorities • In 2015-16, together we conducted the first-evernationwide federal/state debt collection enforcement sweep – Operation Collection protection • In 2018, togetherparticipants continue to meet, target bad actors, share information, coordinate investigations, take joint and coordinated actions

41. Participating State Agencies • Arizona Department of Financial Institutions • Colorado Department of Law, Consumer Credit Unit • Connecticut Department of Banking • Florida Office of Financial Regulation • Idaho Department of Finance • Maine Bureau of Consumer Credit Protection • Maryland Office of the Commissioner of Financial Regulation • Massachusetts Division of Banks • Minnesota Department of Commerce • Nevada Financial Institutions Division • New Mexico Regulation & Licensing Department, Financial Institutions Division • New York State Department of Financial Services • North Dakota Department of Financial Institutions • Rhode Island Division of Banking • South Carolina Department of Consumer Affairs • Washington State Department of Licensing • Wisconsin Department of Financial Institutions

42. 2018 & Beyond - Join Us! • The Collection Protection Group holds quarterly conference calls on the first Thursday of the month • We share information about illegal debt collection operations (e.g. the true location of a phantom collection agency) • We hold programs on joint and coordinated investigation best practices • We form working groups to jointly investigate bad actors or develop better ways to work together

43. Thank You! Tom Carter, Attorney National Coordinator Collection Protection Group Southwest Region Federal Trade Commission (214) 979-9372 tcarter@ftc.gov