Hudson Cook Brings Another Former CFPB Official to Firm


Hudson Cook bolstered its partner roster of former high-ranking enforcers who held roles at the Consumer Financial Protection Bureau and the Federal Trade Commission.

This week, the law firm added Lucy Morris as a partner in its Washington, D.C. office. Morris brings 25 years of experience in all aspects of consumer finance law and public policy. The firm indicated she will support the firm’s enforcement and compliance practices, and her experience will further enhance the firm’s ability to provide meaningful and practical advice to its clients.

“Lucy brings a wealth of experience with consumer financial services regulation, from both the CFPB and the FTC, and she will be a great addition to our practice,” Hudson Cook chairman Tom Hudson said.

From 2011 to 2014, Morris served as deputy enforcement director in the Division of Supervision, Enforcement, and Fair Lending at the CFPB. Morris’ responsibilities at the CFPB included overseeing investigations and litigation relating to consumer financial products and services, including credit cards, mortgage origination, mortgage servicing, payday lending, debt collection, credit reporting and debt settlement. 

From 2010 to 2011, Morris served as a founding member of the implementation team that organized the CFPB after passage of the Dodd-Frank Act, helping to stand up the bureau’s enforcement, supervision and other functions.

Before joining the CFPB, Morris worked at the FTC from 1989 to 2010.  She served in a variety of positions in the FTC’s Bureau of Consumer Protection, including assistant director of financial practices and assistant to the director. 

Morris worked in the Division of Financial Practices for 18 years, where she was responsible for protecting consumers of financial products and services through law enforcement, rulemaking, policy development and public outreach. During her tenure at the FTC, Lucy supervised, litigated, and investigated complex law enforcement actions involving a variety of consumer financial products and services, including mortgage origination, mortgage servicing, credit reporting, debt collection and debt settlement.

Morris was given the Chairman’s Award in 2008, the FTC’s highest award, in recognition of her accomplishments.

Before joining the FTC, Morris practiced law for three years as a litigation associate at Betts, Patterson & Mines in Seattle. 

Morris speaks frequently on topics relating to the CFPB, law enforcement, litigation, and consumer financial protection.

With the addition of Morris, Hudson Cook’s stable of legal experts now includes Joel Winston (former head of the FTC’s debt collection enforcement program) and Rick Hackett (former head of CFPB’s office of installment and liquidity lending markets).

VTS Addresses 2 Major Compliance Concerns with Enhancement

TUCSON, Ariz. - 

Here’s a development that ought to be welcome news to auto finance companies, forwarding organizations and repossession agencies: an enhanced compliance tool that’s now available at a lower price.

This week, compliance monitoring provider Vendor Transparency Solutions launched VTS 2.0 and its newest product VTS Basic. VTS president Max Pineiro explained the latest developments addressed what he contends are the two biggest concerns for service providers in the industry:

1. Cost of compliance
2. Multiple compliance platforms that are required to service clients

“The era of compliance has bought a new demand on an industry that has been historically unregulated and where regulatory compliance was non-existing,” Pineiro said.

The company pointed out that that VTS Basic is designed for finance companies and forwarders that wish to conduct their own level of vetting, due diligence, document tracking and compliance monitoring. Because VTS will not be providing the monitoring, the company reduced to a base rate of $495.

Pineiro noted that VTS Basic also is designed for those service providers that needed a cost effective solution to create and gather the necessary required documents. VTS Basic can enable the subscriber to get full use of the completely redesigned VTS platform, which includes

— All compliance manual templates
— Creation of a VTS profile
— Use of the VTS complaint handling module
— VTS marketing module
— VTS continued education

Pineiro also mentioned subscribers will also have access to ordering background checks and site inspections as well as the option to upgrade to VTS Professional at any time.

VTS Professional is the current product where VTS provides the full vetting, all due diligence, document tracking and full compliance monitoring. Pineiro said that solution is priced at a base rate of $1,295.

“VTS is extremely proud of what we have been able to achieve,” Pineiro said. “We have been listening to the needs of both lenders and their service providers. We have heard you loud and clear.

“VTS Basic will fill those needs and put the leading compliance solution in reach for the entire industry to benefit from,” he continued. “Our focus is on the continued development of the platform, adding additional products and services for our subscribers.”

The moves made by VTS already have been cheered by the leadership of Allied Finance Adjusters, whose repo agency members plan to leverage VTS’ compliance solution.

“In the interest of helping to lower compliance costs for the repossessors, we need a cost effective model that meets the majority of auto lender’s needs,” Allied Finance Adjusters president George Badeen said.

Allied Finance Adjusters second vice president James Osselburn added, “One of the visions of Allied Finance Adjusters was to see a cost effective compliance program. Through VTS Basic, the industry has achieved that goal.”

And Pineiro hinted more developments also are in VTS’ pipeline for its solution available at

“We have two monumental announcements coming later in the fourth quarter of 2014,” he said.

Several Moves Expected at CFPB Field Hearing

CARY, N.C. - 

As a lobbying group reportedly backed off its campaign against the agency’s drive to push full consumer complaint information online, the Consumer Financial Protection Bureau appears poised to tighten its regulatory grip on the auto finance industry.

With the CFPB set to have another field hearing about vehicle financing on Thursday, the Wall Street Journal reported that the bureau is about to launch in-depth reviews of 40 of the largest finance companies to determine whether the operations are following federal consumer-protection laws. People familiar with the situation told the newspaper the details on Tuesday.

The report indicated the CFPB’s investigation would include some of the largest captive finance companies for automakers such as Ford, Toyota, Honda and Nissan. According to Experian Automotive’s second-quarter data, just those four captives alone combined to hold 12.91 percent of the vehicle finance market.

The presumed announcement of the additional investigations is on top of what the American Financial Services Association expected to be revealed during Thursday’s event in Indianapolis. AFSA informed its members last week that the CFPB likely will release a larger participant proposed rule for auto finance companies and a white paper with more details on the bureau’s proxy methodology for identifying discrimination in indirect auto financing.

AFSA officials explained that under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to supervise nonbank covered persons of all sizes in the residential mortgage, private education lending and payday lending markets.

In addition, AFSA indicated the CFPB has the authority to supervise nonbank larger participants of markets for other consumer financial products or services, as the CFPB defines by rule. The CFPB already has released larger participant rules for the international money transfer, consumer debt collection, student loan servicing markets, as well as for credit reporting agencies.

“Auto finance companies will be designated as larger participants based on the annual volume of loan originations,” AFSA said. “It is not yet known if ‘annual volume’ will be calculated in terms of dollars or number of transactions.”

And with regard to this white paper, CFPB director Richard Cordray said the document was in the works when he testified during a hearing held by the U.S. House Financial Services Committee to share the CFPB’s semiannual report back in June.

“I think it’s been a source of frustration to the committee, to me and to the bureau that we’ve been back and forth on different kinds of information about this,” Cordray told House lawmakers about questions regarding disparate impact in the vehicle finance space. “I think we’re providing a lot of information, but people identify other information they want. Partly as a result of that, we are going to put out a white paper on the proxy methodology that will try to address this very directly later this summer.”

“We’ll continue to try to be responsive on this,” Cordray continued. “The reality is the auto industry and the auto lenders, they know all about this because they’re constantly monitoring it. They have to fend off private lawsuits whether the CFPB ever existed or not. They do the same analysis that we do, I believe. We’ve had lots of discussions with them. We’d like to have more. It’s been an ongoing dialogue.”

And speaking of dialogue, Bloomberg reported earlier this week, the Financial Services Roundtable — a nearly 100-member advocacy organization whose supporters include a wide array of captives and commercial banks that offer vehicle financing — halted its extensive campaign the organization has called, “The CFPB Rumor Mill.”

This summer, the CFPB announced a new policy proposal that would empower consumers to publicly voice their complaints about consumer financial products and services. When consumers submit a complaint to the CFPB, they would have the option to share their account of what happened in the CFPB’s public-facing Consumer Complaint Database.

However, Bloomberg reported that the roundtable’s arguments against the database — including a four-point dispute that included graphics and videos — went against the thinking of organization members who reportedly were not consulted about the content and strategy.

The chief executive officer of the Financial Services Roundtable is Tim Pawlenty, a former two-term governor of Minnesota who ran for president in 2012. Pawlenty discussed the campaign against the CFPB complaint database with Bloomberg this week.

“We don’t have any more plans for a public process,” Pawlenty told Bloomberg, conceding that the membership wasn’t fully behind him on the campaign. “Some members had anxiety. It involved some risk.”

Bloomberg indicated that members who had concerns about the campaign included JPMorgan Chase, Bank of America and Citigroup.

Editor’s Note: SubPrime Auto Finance News will be tweeting (@SubPrimeNews) during Thursday’s CFPB field hearing. Also look for special reports to be posted on the publication’s website ( 

US House Proposes More Credit Reporting Regulations


In light of the Consumer Financial Protection Bureau handing out stern enforcement actions connected with credit bureau reporting, the ranking member of the U.S. House Financial Services Committee now is joining the regulatory fray.

As the chairman-elect of the American Bankers Association attempted to assure the subcommittee about how the industry is committed to consistent, accurate credit reporting, Rep. Maxine Waters released a proposal that would make “sweeping” reforms to the nation’s consumer reporting system.

Waters, a California Democrat, explained her draft proposal, entitled the “Fair Credit Reporting Improvement Act of 2014,” will enhance requirements on the consumer reporting agencies (CRAs), and furnishers that provide information to these CRAs, to guarantee consumers have the capacity to ensure that the information on their credit reports is accurate and complete.

Waters noted her proposal comes in the aftermath of a number of recent court cases, news reports and studies that have detailed the significant problems and flaws in the current consumer reporting system, including the CFPB penalizing First Investors Financial Services Group.

“Credit reports are no longer just used exclusively by lenders in making a credit decision.  More and more, credit reports are used in a variety of ways, from employment decisions, to determining a consumer’s ability to rent a home, buy a car, or purchase insurance,” Waters said.

“A person’s credit report is too important in determining access to a wide array of opportunities for these reports to contain inaccurate and incomplete information,” she continued. “This proposal addresses many of the flaws with the existing consumer reporting system, by making common-sense changes that enhance consumers’ rights, create more transparency over the consumer reporting and credit scoring process, and increase the accountability of credit reporting agencies, furnishers and companies that develop credit scoring models and formulas.”

According to the Federal Trade Commission, one in five, or roughly 40 million consumers, have had an error on one of their credit reports. The lawmaker said about 10 million consumers have errors that could increase the cost of credit available to them.

The draft proposal would make several reforms to the Fair Credit Reporting Act. Key provisions include:

— Providing relief to millions of borrowers who were victimized by predatory mortgage lenders and servicers, by removing adverse information about these residential loans that are found to be unfair, deceptive, abusive, fraudulent or illegal.

— Ending the unreasonably long time periods that most adverse information can remain on a person’s credit report, shortening such periods by three years.

— Giving consumers the tools to “truly” verify the accuracy and completeness of their credit reports, by mandating that furnishers retain all records for as long as adverse information about these accounts remains on a person’s credit report.

— Eliminating punitive credit scoring practices by removing fully paid or settled debt from credit reports, including medical debt, which has been found not to be a reliable predictor of a person’s creditworthiness.

— Giving distressed private education loan borrowers the same chance to repair their credit as federal student loan borrowers, by removing adverse information when delinquent private education loan borrowers make consecutive on-time monthly payments for a certain period of time on their loans.

Waters also mentioned the draft proposal also restricts the use of credit reports for employment purposes, which employers are increasingly using to screen qualified job applicants despite a lack of adequate data to show that a person’s credit is predictive of their job performance.

She pointed out the proposal also sets a dollar amount that a consumer can be charged to buy their credit score from CRAs, while also requiring CRAs to provide consumers with a free annual credit or educational credit score upon a consumer’s request.  

“Over 10 years ago, Congress tried to strengthen consumer protections, but our consumer reporting system still has a number of systemic flaws. I believe we must take action to end the heartache that has plagued millions of consumers who have been unable to obtain a job, go to college, or buy a car because of their credit score,” Waters said.

“Many of these problems have stemmed our country’s economic growth. This draft proposal attempts to meet our obligation to ensure that consumers who have fallen victim — or fallen on hard times — are not deprived of the chance to achieve the American Dream,” she went on to say.

What Industry Is Already Doing

John Ikard is ABA chairman-elect and chief executive officer of FirstBank, headquartered in Lakewood, Colo. Ikard told House subcommittee members about how banks and other finance companies work diligently to provide accurate information to credit bureaus, which provides tremendous value to consumers and institutions alike.

“For consumers, credit reports provide a compilation of their historical performance on obligations which enables them to shop around for credit from any lender knowing that all lenders have a similar base of detailed information,” Ikard said.

Without these reports, consumers would have to provide extensive documentation lender by lender or be limited to a financial institution that they had previously done business with. Thus, credit reports open up the options for consumers and ensure that they can shop around in a very competitive market — nationwide — for the best loan or account that serves their needs. The greater efficiency and competition means better deals and lower prices for consumers,” he continued.

Ikard emphasized how important credit bureau reports are in the underwriting process, especially if the finance company hasn’t worked with this potential borrower previously.

“Banks benefit because an accurate understanding of a credit applicant’s credit history means they are better able to predict who is likely and unlikely to repay a loan, allowing them to make better decisions on whether to grant credit and at what price. Credit reports have proven to be good predictors of how consumers will manage their finances in the future,” Ikard said. “The ability to make more accurate decisions helps lower their costs, which helps to lower prices for consumers.

“Accuracy within credit reports is critical, of course, to ensure that customers are evaluated and extended loans based on the history of their individual performance,” he continued.

And if there are errors in a person’s credit file?

“Inaccurate reports undermine the value of the system,” Ikard told lawmakers. “An inaccurate report could prevent a qualified borrower from getting the credit that they deserve by making them look less creditworthy. An inaccurate report that is missing negative information could also make a borrower eligible for credit that they are ill prepared to handle. Thus, accurate credit reports ensure that credit is extended to deserving borrowers.”

Ikard wrapped up his prepared testimony in front of the committee by stressing how critical of a resource credit reports are and how they’re just as important to banks and finance companies as they are to consumers.

“Having such an efficient system is critical to credit availability for all deserving borrowers and is a key driver of economic growth, competition, lower prices and better deals for consumers,” he said. “Because the benefits to both customers and lenders are so large, it is in the best interests of both parties to ensure that credit reports are as accurate as possible.

Banks have invested heavily in systems and processes to report accurate data and contribute to this important public good. The system would be unworkable without accurate information that all parties can rely upon,” Ikard continued.

“Having an effective dispute mechanism is critical to this process. But any process can also be abused. Repeated unfounded disputes absorb resources that hurt everyone,” he went on to say. “Changes can be made that would help to stop such abuses without hurting legitimate claims to correct errors.”

Researcher: CFPB Lacks Authority to Publish Complaints


A George Mason University researcher and Yale School of Law graduate found three significant issues with the Consumer Financial Protection Bureau wanting to publish consumer complaint narratives online — including the CFPB lacking the authority to make such a move.

Hester Peirce sent a nine-page letter to the CFPB articulating the position, stressing the bureau’s plan to expand the database to include consumer complaint narratives is outside its statutory authority. Despite the CFPB’s contentions to the contrary, Peirce also stated the strategy is also inconsistent with open government directives such as Office of Management and Budget’s Open Government Directive.

“The other government databases that the bureau cites as parallels to its own are not appropriate models for the bureau to follow,” said Peirce, a senior research fellow within the financial markets working group at George Mason’s Mercatus Center.

Peirce along with research assistant Vera Soliman told the CFPB in the letter sent last week that Congress did not authorize the bureau to launch a public consumer complaint database. They recapped that the CFPB makes a case for the database because of its goals to ensure that “consumers are provided with timely and understandable information to make responsible decisions about financial transactions” and “markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”

However, Peirce contends that publicizing complaint narratives as the bureau intends would work counter to both of these objectives, creating the possibility of even more dire consequences.

“The consumer complaint database invites consumers to rely on incomplete and potentially inaccurate anecdotal information in their financial decision-making. By potentially harming the reputations of high-quality providers of consumer financial products and services, the consumer complaint database could adversely affect markets,” she said.

Before tackling the question of authority, Peirce also informed the CFPB in this letter that “the expanded database is a solution in search of a problem,” and “costs of the proposed database expansion outweigh the benefits.”

To back up her position, Peirce explained services such as Yelp and collect and publish feedback on numerous consumer products and services. But Peirce noted these sites contain more balanced and complete information for consumers than a government website designed solely to collect complaints.

“In addition, both companies have developed systems to empower readers to assess reviews for accuracy and usefulness,” she said.

Devoid of what she contends is the proper context, Peirce also projected that every complaint will carry equal weight, regardless of the facts and circumstances and the complainant’s motivation.

“Because of their location in a government database, the complaints will carry an air of official gravity,” she said.

“Given that the database collects only complaints, it is an intentionally one-sided marketplace,” Peirce continued. “Even for companies with many satisfied customers, positive comments will not be included in the database to offset negative comments. Consumers, relying on the database as a relevant input in their financial decision-making, will not get an accurate picture.”

Peirce also touched on how much this database might impact the compliance costs finance companies face — expenses already on an upward trajectory because of the CFPB and other regulators.

“Because of the public and permanent nature of the database and the inclusion of a field related to company responsiveness, companies are likely to feel compelled to resolve even meritless complaints,” she said. “Doing so will decrease the attention they can devote to customers whose complaints have merit. Complainants may end up with preferable treatment to people who deal directly with the company.

Peirce closes her letter to the CFPB with a simple recommendation — return to the drawing board.

“Once back at the drawing board, the bureau should analyze whether there is a market failure, whether the bureau is well suited to solve that market failure, whether Congress has given the bureau the authority to create a public complaint database, and the potential costs and benefits of creating a responsible (i.e., not misleading) public complaint database,” she said.

The CFPB first made its complaint database proposal back in August.

Premier Warranty Hosts AFIP Certification Boot Camp


Premier Warranty hosted an Association of Finance & Insurance Professionals certification boot camp for the sales and F&I personnel of its dealer clients in Arkansas, Louisiana and Texas this summer in Bossier City, La.

Attendees represented 10 dealerships operated by the following dealers and dealer groups:

— ChevyLand and Morgan Auto Group in the Louisiana cities of Shreveport and Bossier City

— Courtesy Chevrolet in Ruston, La.

— McLarty Auto Mall in Texarkana, Texas

— Riser Auto Group in Hot Springs, Ark.

The session ended with the administration of the AFIP certification exam, with 18 attendees earning CPFS (Certified Professional in Financial Services) status and two earning SPFS (Senior Certified Professional in Financial Services) status.

According to Premier Warranty president Adam Barocio, “The boot camp fully met our objectives. Our dealers’ personnel were certified in a professional, efficient process that allowed them to get back to the dealership quickly. They spent very little time outside their stores.”

Premier Warranty, based in Grand Prairie, Texas, provides dealers with customized F&I management solutions, training and products to improve the overall customer experience and discover new revenue opportunities.

BillingTree Finalizes Examination in Conformity with SSAE


BillingTree recently completed its examination in conformity with Statement on Standards for Attestation Engagements (SSAE) No. 16, Reporting on Controls at a Service Organization for the period from May 1 of last year through April 30 of this year.

The company said the examination was performed by an independent auditing firm.

Completion of the SSAE 16 Type II examination indicates that BillingTree processes, procedures and controls have been formally evaluated and tested by an independent accounting and auditing firm. The examination included the company’s controls related to:

— Physical security
— Computer operations, including availability, information security, application development maintenance and documentation
— Data communication
— Client setup and maintenance
— Transaction processing and transaction reporting.

The company recapped that SSAE 16 is designated by the Securities and Exchange Commission as an acceptable method for a user entity’s management to obtain assurance about service organization internal controls without conducting additional assessments.

In addition, BillingTree mentioned the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 make SSAE 16 reports even more important to the process of reporting on effective internal controls by public companies.

BillingTree vice president of operations and finance Richard Knowles also explained a SSAE 16 examination is widely recognized, because it represents that a service organization has been through an evaluation of their control activities as they relate to an audit of the financial statements of its customers.

Knowles added that a Type II report not only includes the service organization's system description, but also includes detailed testing of the design and operating effectiveness of the service organization's controls.

“At BillingTree, we are committed to providing our customers and partners with the highest level of assurance that their critical data is being stored in a secure location that employs stringent internal business processes, IT control and security,” Knowles said.

“BillingTree's dedication to ensuring our payment solutions are compliant and secure has again been documented, reviewed and audited by an independent third party, which has shown our controlled environment to be robust, transparent and consistent,” he went on to say.

CFPB’s Latest Mandate: Watch Your Service Providers


One of the marketing hooks that subprime finance companies of all sizes often use contains the pitch about how consistent payments can lead to steady reporting to credit bureaus and eventually the possible healing of the borrower’s profile.

Hudson Cook partner Jean Noonan emphasized the recent enforcement action against First Investors Financial Services Group reinforces the responsibilities finance companies take when providing this service.

Last month, the Consumer Financial Protection Bureau said First Investors Financial Services Group failed to fix known flaws in a computer system that was providing inaccurate information to credit reporting agencies. The consent order signed by the finance company included a $2.75 million fine.

Noonan told SubPrime Auto Finance News last week that the regulatory moves bureau officials made shows how seriously the CFPB is taking strict compliance with the furnisher’s rule under the Fair Credit Reporting Act.

“As we can see by reading the consent decree, given the relatively small numbers of consumers effected given the overall size of the portfolio, there was no allegation of any consumer injury whatsoever. And yet, the CFPB still asked for a pretty steep civil penalty of $2.75 million,” Noonan said.

“Now $2.75 million against a company that’s not in the top 50 originators of auto finance contracts, that’s a pretty sizeable sum, especially without an allegation of consumer injury,” she continued. “Now they talk about potential consumer injury but there’s no evidence that they cite at least. I think that’s a very sobering fact for the industry.”

Part of that sobering fact is just because a finance company has a service provider whose job is to provide the technological backbone for accurate credit reporting doesn’t lift the institution from feeling the brunt of responsibility when problems arise. CFPB director Richard Cordray reiterated that point immediately after the bureau made the consent order public.

“Today’s action sends a signal to all companies that supply information to the credit reporting agencies that they must have sound practices in place that protect consumers,” Cordray said. “You cannot pass the buck on this responsibility. Using a flawed computer system purchased from an outside vendor does not get you off the hook for meeting your own obligations.”

Noonan acknowledged the bureau’s stance places finance companies into a difficult position if a problem is detected.

“What do you do if you discover a glitch in your system? You can continue reporting it while you work diligently to fix the glitch. Or you can cease reporting. One thing that we learn from this consent agreement is that you really must cease reporting the inaccurate information until you get the glitch fixed,” Noonan said.

“It can be a problem, especially in the subprime area because a lot of subprime creditors and subprime customers count on that regular reporting of credit information,” she continued. “Sometimes a subprime creditor will say one of the benefits is that we report to credit bureaus and if you make payments on time you’ll be able to rebuild your credit history or to build it in the first instance if you don’t have one.

“That’s important to consumers. Stopping reporting can be a problem for consumers but you really have two bad choices in that instance,” Noonan went on to say. “If you have promised consumers that you’re going to report, and you have to cease reporting because you have a glitch in your system, then the CFPB is going to be on your case either way.”

In order to avoid the wrath of the CFPB as much as possible, Noonan and Hudson Cook are stressing a point they often make to their clients — and one Cordray hammered, too.

Finance companies must keep close tabs not only on their service providers but also complaints that might be arriving. Noonan shared that a client recently detected a problem when several discrepancies arrived in a short time. The problem was corrected and the accurate consumer information was sent to credit bureaus within two weeks thanks to “around the clock work,” according to Noonan.

“Credit reporting is a complicated business,” she said. “It’s not rare for discrepancies to happen. That means you’ve got have a good audit system so that you know you’re reporting accurate information. You’ve got to do great complaint monitoring.”

Noonan finished her assessment by touching on two final points other finance companies can learn from the action taken against First Investors Financial Services Group.

“Keeping a close tab on service providers is always a very important lesson to take to heart. The consent agreement indicated that First Investors was using a service provider. Even if it is a service provider with a great reputation, you still have to be sure that the service is complying with a creditor’s legal obligations. In this case, that’s to furnish accurately,” Noonan said.

“What this consent agreement teaches us — and I think we’ll be seeing other consent agreements with similar issues — is that you’ve got to be very on top of things so that if through misfortune you have a discrepancy, that you detect it, fix it and you get that fix locked in and you get the information corrected for the consumer,” she added.

Hudson Cook Adds 2 Partners to Boost Collections Practice


On Tuesday, Hudson Cook added two nationally recognized collections attorneys as partners to support the firm in creating a new practice group. That Hudson Cook segment will focus on lender oversight and regulatory compliance for third-party debt collectors, debt buyers, collections law firms and creditors collecting their own debts.

The two newest partners are Gary Becker and Barbara Sinsley.

Becker is an attorney and entrepreneur who has worked in the collections industry for nearly 30 years. He is the former chief executive officer, chairman and general counsel of national collection agency DCM Services; a founding partner of Balogh Becker, one of the nation’s largest collection law firms; and a founding board member of the National Association of Retail Collection Attorneys.

“Gary is an innovator in the application of technology to collections and a recognized leader in applying legally compliant customer-centric approaches in collections and recovery,” Hudson Cook said.

The firm highlighted Sinsley is considered one of the nation’s leading attorneys in the area of debt sales and consumer collections regulatory preparedness and compliance with more than 24 years of experience.  She previously served as general counsel of DBA International (formerly the Debt Buyers Association).

Over the course of her career, both as an outside attorney and in-house counsel, Hudson Cook mentioned Sinsley has assisted dozens of large and small collections businesses in coming into compliance with state and federal  laws, and has represented numerous industry members before the Consumer Financial Protection Bureau, Federal Trade Commission, state attorneys general and in the courts.

Hudson Cook noted Becker and Sinsley will be joining several current firm attorneys, including Joel Winston (former head of the FTC’s debt collection enforcement program), Chuck Dodge, Ron Gorsline, Eric Johnson, Blake Sims and Tom Buiteweg in a group that focuses on compliance as it relates specifically to the regulated aspects of lenders’ collection and recovery; creditor supervision of third-party debt collection by agencies and law firms; and the sale of consumer debt.

“Gary and Barb bring to the table a wealth of experience and knowledge, allowing us to increase the breadth and depth of our collections and debt buying practice,” Hudson Cook chairman Tom Hudson said. “They will develop and offer broad-based solutions, including compliance audits, for businesses trying to ‘stay ahead of the curve’ as the government increases its enforcement and regulatory efforts in this area. 

“By leveraging new technologies, we can provide these services in the most efficient and cost-effective way possible,” Hudson continued. “In addition to counseling businesses on the specific concerns they face, we believe we best serve our clients by helping them be prepared in advance, if and when the regulators come calling. We are very pleased to welcome Gary and Barb to the firm.”

SEC Issues New Rules for ABS & Rating Agencies


Along with approving new requirements for credit rating agencies such as Moody’s and Standard & Poor’s, the Securities and Exchange Commission this week also adopted revisions to rules governing the disclosure, reporting, and offering process for asset-backed securities (ABS), which often batches together auto loans from a wide array of finance companies.

SEC officials explained that they made the move to enhance transparency, better protect investors, and facilitate capital formation in the securitization market.

The agency highlighted the new rules, among other things, require loan-level disclosure for certain assets, such as residential and commercial mortgages and auto loans. The SEC indicated the rules also provide more time for investors to review and consider a securitization offering, revise the eligibility criteria for using an expedited offering process known as “shelf offerings,” and make important revisions to reporting requirements.

“These are strong reforms to protect America’s investors by enhancing the disclosure requirements for asset-backed securities and by making it easier for investors to review and access the information they need to make informed investment decisions,” SEC chair Mary Jo White said.

“Unlike during the financial crisis, investors will now be able to independently conduct due diligence to better assess the credit risk of asset-backed securities,” White continued.

The SEC recapped that ABS are created by buying and bundling loans, such as residential and commercial mortgage loans, and auto loans and leases, and creating securities backed by those assets for sale to investors.  A bundle of loans is often divided into separate securities with varying levels of risk and returns.  Payments made by the borrowers on the underlying loans are passed on to investors in the ABS.

Officials reiterated ABS holders suffered significant losses during the 2008 financial crisis.

“The crisis revealed that many investors in the securitization market were not fully aware of the risks underlying the securitized assets and over-relied on ratings assigned by credit rating agencies, which in many cases did not appropriately evaluate the credit risk of the securities,” the SEC said.

“The crisis also exposed a lack of transparency and oversight by the principal officers in the securitization transactions,” the agency continued. “The revised rules are designed to address these problems and to enhance investor protection.”

SEC officials noted the revised rules become effective 60 days after publication in the Federal Register. They emphasized issuers must comply with new rules, forms, and disclosures other than the asset-level disclosure requirements no later than one year after the rules are published in the Federal Register. 

The agency went on to mention offerings of ABS backed by residential and commercial mortgages, auto loans, auto leases and debt securities (including resecuritizations) must comply with the asset-level disclosure requirements no later than two years after the rules are published in the Federal Register.

SEC Adopts Credit Rating Agency Reform Rules

In other news from the SEC, the agency approved new requirements for credit rating agencies to enhance governance, protect against conflicts of interest, and increase transparency to improve the quality of credit ratings and increase credit rating agency accountability. 

Officials explained the new rules and amendments — which implement 14 rulemaking requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act — apply to credit rating agencies registered with the Commission as nationally recognized statistical rating organizations (NRSROs).

“This expansive package of reforms will strengthen the overall quality of credit ratings, enhance the transparency of credit rating agencies and increase their accountability,” White said.

“These reforms will help protect investors and markets against a repeat of the conduct and practices that were central to the financial crisis,” she added.

The SEC indicated the new requirements for NRSROs address internal controls, conflicts of interest, disclosure of credit rating performance statistics, procedures to protect the integrity and transparency of rating methodologies, disclosures to promote the transparency of credit ratings, and standards for training, experience and competence of credit analysts. 

“The requirements provide for an annual certification by the CEO as to the effectiveness of internal controls and additional certifications to accompany credit ratings attesting that the rating was not influenced by other business activities,” officials said.

The commission also adopted requirements for issuers, underwriters, and third-party due diligence services to promote the transparency of the findings and conclusions of third-party due diligence regarding asset-backed securities.

Officials noted that certain amendments will become effective 60 days after publication in the Federal Register. 

The SEC added the amendments with respect to the annual report on internal controls and the production and disclosure of performance statistics will be effective on Jan. 1, 2015, which means that the first internal controls report to be submitted by an NRSRO would cover the fiscal year that ends on or after Jan. 1, 2015, and the first annual certification on Form NRSRO relating to performance statistics is required for the annual certifications filed after the end of the 2015 calendar year.