THE FTC AND STUDENT LOAN DEBT RELIEF AFSLR Conference October 9, 2014

1. THE FTC AND STUDENT LOANDEBT RELIEFAFSLR ConferenceOctober 9, 2014 Michelle Grajales Federal Trade Commission Division of Financial Practices

2. What Does The FTC Do? • Dual mission to protect consumers and promote competition. • Goal of advancing consumer interests while encouraging innovation and competition in our dynamic economy. • Policy development through hearings, workshops, and conferences. • Collaboration with law enforcement partners across the country and around the world. • Cooperation with international agencies and organizations to protect consumers in the global marketplace.

3. What Does The Bureau of Consumer Protection Do? • Protect consumers by stopping unfair, deceptive or fraudulent practices in the marketplace. • Conduct investigations, sue companies and people that violate the law. • Develop rules to ensure a vibrant marketplace. • Educate consumers and businesses about their rights and responsibilities. • Collect complaints about hundreds of issues and make them available to law enforcement agencies worldwide for follow-up.

4. Where Does Student Loan Debt Relief Fit In? • Part of our debt relief program area • Policy work • Enforcement work • Traditional “three” business models in debt relief • Emerging business model • Support business models

5. What Statutes Does The FTC Enforce In This Area? • Telemarketing Sales Rule. 16 C.F.R. Part 310 • Main Entities/Primary Activities Covered • Companies that provide substantial assistance to them knowing or consciously avoiding knowing of their conduct • Outbound and inbound telemarketing calls covered under debt relief amendments • Unsecured debts • Negotiation or alteration of existing debts • Primary Restrictions • Advance fee ban and other fee restrictions • Prohibition on false or unsubstantiated material claims • Pre-sale disclosures

6. The FTC Act, 15 U.S.C § 45(a) • The Federal Trade Commission Act: • Prohibits unfair or deceptive business practices in commerce. • FTC can file administrative actions or law suits in federal district court to stop law violations. • Referrals to DOJ for civil penalties. • Covers lead generators as well as service providers.

7. How Are These Laws Applied? • The FTC has filed two debt relief cases since the AFSLR conference last year. • FTC v. DebtPro 123 LLC, et al., SACV 14-00693 JLS (Anx)(C.D. Cal. May 2, 2014) • debt resolution program would completely resolve consumers' credit card, medical, and student loan debts between 30% to 70% of the amount owed within 18, 24, or 36 months. • Attorney assistance claims, refund claims, credit repair claims. • Upfront and monthly fee. • Complaint includes FTC Act deception counts, TSR, and CROA.

8. FTC v. One Or More Unknown Parties d/b/a American Bill Pay Organization, Case 1:14-cv-01414-RBW (D. D.C., Aug. 19, 2014) • Phony government assistance program. • Promised to improve consumers’ credit scores in 30 days. • Promised to get consumers grants of up to $75,000 towards their debts. • Ads included a recording of President Obama saying “I approve this message.” • Upfront “service charge” of $900-$1100 • Complaint charged FTC Act violations for savings claims and credit repair claims, as well as government affiliation.; CROA counts for advanced fee and misleading representations.

9. What Can I Take Away From These Case Examples? • FTC actions continue to include debt relief programs, including student loan debt relief. • The advance collection of fees • “service fee,” “donation,” “contribution” • Credit repair claims • Lawyer claims • Consumer perspective • Providing “means and instrumentalities” • Clarity and accuracy in all consumer interactions.