WASHINGTON UPDATE AND DC’s INFLUENCE ON HOW WE DO OUR JOBS

1. WASHINGTON UPDATEANDDC’s INFLUENCE ON HOW WE DO OUR JOBS

2. LEGAL DISCLAIMER • The views and opinions expressed by the Presenters are those of the Presenters and not necessarily representative of NCM or COHEAO. • This information is not intended as legal advice and may not be used as legal advice. Legal advice must be tailored to the specific circumstances of each case. • Every effort has been made to assure this information is up-to-date as of the date of publication. • This information is not intended to be a full and exhaustive explanation of the Federal Regulations in any area, nor should it be used to replace the advice of your own legal counsel.

3. AGENDA • Introduction • What, Where, Why, Who & How? • Hot Topics on Campus • Laws & Regulations • Three Branches of Government • Legislative • Executive • Judicial • How to Influence the Influencers • Example Financial Responsibility Statements • Resources • Questions and Discussion

5. WHAT, WHERE, WHY,WHO AND HOW • What are the areas of government that influence? • What do they influence? • What are the laws and regulations that affect us? • Where on campus does the compliance responsibility lie?

6. WHAT, WHERE, WHY, WHO AND HOW • Why do we have to comply? • When do you update your policy and procedures? • Who will implement changes? • How much does Washington influence how we do our jobs? • How can you make a difference and influence the influencers?

7. HOT TOPICS ON CAMPUS • 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

8. LAWS AND REGULATIONS TO CONSIDER • 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. . .

9. LEGISLATIONOR REGULATION • Legislation creates the law • Regulations are specific requirements within the legislation

10. THE THREE BRANCHES OF GOVERNMENT

11. LEGISLATIVE

13. WELCOME TO THE HILL

15. HOUSE HEA REAUTHORIZATION PROPOSALS • Legislation Introduced in 2018 • PROSPER Act - H.R. 4508 – Republicans “Promoting Real Opportunity, Success, and Prosperity through Education Reform Act” • Aim Higher Act - H.R. 6543 – Democrats

16. PROSPER ACT • Replaces Direct Loan Program with new Federal One Loan Program • Eliminates Perkins & SEOG; major changes to Direct Loan Program • No Grad PLUS, Parent PLUS capped • Subsidized Direct loans eliminated for undergrads • Unsubsidized Direct limits raised to make up for loss of Perkins • Streamlines Repayment Plans • Risk Sharing and Accountability • Increases Pell Grants - $300 bonus if taking 15 credit hours • Eliminates Public Service Loan Forgiveness • Paychecks for Students • Credit balance refunds paid in equal weekly or monthly installments • Deposited on a debit card

17. AIM HIGHER ACT Keeps status quo on aid, unlike PROSPER, with some changes • Pell Grants maximum raised, indexed to inflation • Perkins Loan Program recreated along “unsubsidized Perkins” model proposed in Obama Administration; like unsubsidized Direct loans, federal loan servicing, nationwide volume limit. Open to modifying it. • Caps on Direct and PLUS loans unchanged • Eliminates origination fees • States required to make two years of college free

18. SENATE HEA • No Bills Introduced • Have had several hearings • Priorities • Simplification of the FASFA • Reduce DL repayment options • Income contingent - Cap 10% of Income • 10-year repayment • Accountability System • Improving college affordability • Expanding access to Higher Education • Ensuring student safety and civil rights

19. PERKINS UPDATE • Despite much support, Perkins remains expired • H.R.2482: Introduced 5/17/17, two-year extension through 9/30/19. • 245 cosponsors, a majority of the 435 members of the House of Representatives – 52 R’s and 193 D’s. • S.1808: Introduced 9/14/17, same as House bill. 23 sponsors – 4 R’s and 19 D’s.

20. PERKINS UPDATE • DON’T LIQUIDATE! • Just because the program has expired doesn’t mean it can’t be resurrected • A lot of campus money remains on the table • COHEAO is working to ensure institutions receive the money they are due: • Department delayed recall of FCC • The Department is working on guidance that would allow campuses to retain their share of unreimbursed cancelled loans • Net Process – allow schools to retain some or all of their Perkins collections until they have received the institutional share of cancelled loans, including the arrearages that have built up over the years. • There is a need for ACA to be paid to support school servicing

21. BUDGETAND APPROPRIATIONS • H.R.6157 - Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019 and Continuing Appropriations Act, 2019 • Signed into law on 9/28/18 • The bill includes a provision allowing payments to schools for Perkins Loan servicing 

22. 21ST CENTURY PERKINS • COHEAO’s proposal for HEA Reauthorization includes a new Perkins Loan Program: • New federal funds replace revolving loan funds • School match – level to be determined • Updates the allocation formula, phases out the base guarantee • No in-school interest • No origination fees and low interest • Maintains cancellations for public service • Servicing remains school based

23. OTHER LEGISLATION • College Transparency Act • S.221 • H.R.2434  • Bankruptcy • Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA) • H.R.2366 - Discharge Student Loans in Bankruptcy Act • H.R.6588 - Student Loan Bankruptcy Act • TCPA • 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 • Etc...

24. EXECUTIVE

25. CFPB

26. CONSUMER FINANCIALPROTECTION BUREAU 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.

27. CONSUMER FINANCIALPROTECTION BUREAU • UDAAP • FDCPA • Collection Costs • Updating Laws, New Debt Collection Rules • SOL • FCRA • Service Providers • Collections and Collection Agencies • SCRA • Safeguard Rules • Complaint Process • Financial Literacy • Etc.……

28. CFPB & UDAAP 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 creditor and debt collectors

29. FAIR DEBT COLLECTION PRACTICES ACT (FDCPA) • 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

30. FDCPA COLLECTION COSTS • 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. • 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.

31. COLLECTION AGENCY FEES • Collection Costs – the mutually agreed upon contract amount that the institution pays the collection agency for collecting past-due receivables. • 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.

32. CFPB - DEBT COLLECTIONPROPOSED RULES • 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.

33. STATUTE OF LIMITATIONS (SOL) • 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)

34. FAIR CREDIT REPORTING ACT(FCRA) 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 basis of consumer credit rights in the United States.

35. CREDIT BUREAU REPORTING • 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 rules impose duties for lenders, servicers, collectors and other financial institutions that report or "furnish" information to credit bureaus.

36. FCRA CREDIT REPORTINGINITIATIVES • Requirement to have contract or agreement to pay – Effective 6/15/16 • Do not report debt that did not arise from a contract or an 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 • Reporting of identifiable information - Effective 9/15/17 • Collecting and reporting • Full Name • Address • Social Security Number • Date of Birth

37. CFPB - SERVICE PROVIDERS Supervision of Service Providers • Financial institutions under Bureau supervision may be held responsible for their contractors. • Bureau 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 - Oversee all third party servicers, require audits and make sure requirements are all contract driven.

38. SCRA Servicemembers Civil Relief Act • Intended to postpone or suspend certain civil obligations to enable service members to devote full attention to duty and relieve stress on the family members of those deployed service members. • 50 U.S.C. App. §§ 501—597b

39. FTC - RED FLAGS RULE • Red Flags 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. • 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 January 1, 2008 • https://www.ftc.gov/tips-advice/business-center/privacy-and-security/red-flags-rule

40. GLBA – GRAMM-LEACH BLILEY ACT • 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

41. OTHER REGULATORY ISSUES • EU General Data Protection Regulations • Effective May 25th 2018 • Even anorganizationthat 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/

42. OTHER REGULATORY ISSUES • Section 508 • Congress amended the Rehabilitation Act of 1973 • Requirement for federal agencies to make their electronic and information technology (EIT) accessible to people with disabilities. • Voluntary Produce Accessibility Templates (VPATs)

43. DEPARTMENT OF EDUCATION

44. Department of Education Federal Student Aid • Next Generation (Next Gen) Financial Services Environment • “There’s an app for that” • Dr. Wayne Johnson, Chief Operating Officer of FSA, is heading up the NextGen initiative • New Student Loan Servicer contract(s) still tocome • How PCA’s fit in is still unclear

45. DEPARTMENT OF EDUCATION CYBER SECURITY • 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

46. DEPARTMENT OF EDUCATION LATEST & GREATEST • Borrower Defense to Repayment • Electronic Announcement March 15, 2019 • Guidance concerning some provisions of 2016 final regulations • The original effective date was July 1, 2017 • Delayed by the Department – Now effective • U.S. District Court Ruling • Bauer et al. v. DeVos, Civil Action No. 17-1330 (RDM) the 2016 • Final Regulations took effect immediately after the ruling

47. OTHER REGULATORY ISSUES

48. FERPA • Federal Family Educational Rights and Privacy Act of 1974 • 20 U.S.C. §1232g et. seq. • FERPA gives parents access to their child's education records, an opportunity to seek to have the records amended, and some control over the disclosure of information from the records. • With several exceptions, schools must have a student's consent prior to the disclosure of education records after that student is 18 years old.

49. TILA Truth in Lending Act - Regulation Z • 15 U.S.C. ch 41 § 1601 • Law designed to promote the informed use of consumer credit, by requiring disclosures about its terms and cost to standardize the manner in which costs associated with borrowing are calculated and disclosed.

50. TCPA • The Telephone Consumer Protection Act, 47 U.S.C. § 227, et seq. • Primary law governing the conduct of calls using automatic dialing systems • Think about cell phones in 1991 when this became law • Significant penalties for non compliance • TCPA applies to all entities – not just collection agencies • Only law that applies to both 1st party and 3rd party • Obtain Prior Express Consent – oral or written