Keturah Taylor

Welcome to the third season of State AG Pulse. In this season, we’re selecting one story every week from the state AG news. Over the next ten minutes, we’ll take a quick dive into that story to analyze the impact of AGs as regulators and consumer protection guardians, and provide tips to help your business work successfully with state AGs.

Chris Allen

Hello and welcome back to the third season of State AG Pulse. My name is Chris Allen. I am a partner here at Cozen O’Connor in the State AG Group. And I am very thrilled today to be joined by my colleague Keturah Taylor, out there representing Cozen O’Connor in Portland, Oregon. How are you doing Keturah?

Keturah Taylor

I’m great, Chris. It’s good to be here on my inaugural podcast recording.

Chris Allen

We are excited to have you here too. And so today of course, we’re going to be talking about the Google antitrust search engine trial. No, no, no. We’re not going to be doing that, because when I googled the Google search engine antitrust trial, there were already , articles written about that. So I think instead of spilling more ink about this, we’re going to turn to something that I actually think is a little more interesting, in that it really highlights the authority of state AGs and an intersection of politics, policy and the law in a way that may be lost amid all the Google drama. And that is an effort by the Minnesota AG to police debt collection companies involved in the student loan industry. Keturah, you want to lay out a little background for us about this?

Keturah Taylor

Sure. So I agree this is a super interesting issue and definitely timely as federal student loan payments are restarting in October. So while Google may be taking over the news, I’m happy to cover this topic today. So Minnesota AG, Keith Ellison, he announced that his office has opened investigations into  student loan debt relief companies over allegations that they have violated consumer protection laws by misrepresenting the fees and services that they’re offering and falsely promising student loan forgiveness. On the more administrative side, he’s also alleging that these companies failed to register as they were required to by Minnesota law as debt settlement services. So this isn’t necessarily new. As Attorney General Ellison’s press release noted, his office has taken many actions over the years against fraudulent or allegedly fraudulent student loan debt relief companies. But as I mentioned, with the federal payment pause coming to an end, I think we’ll see renewed attention to this industry and certainly from this office.

Chris Allen

Yeah, and it’s interesting, it’s not only that Ellison’s office has been active with respect to student debt relief companies, but several years ago we were involved in a matter where the Minnesota AG’s office was looking at companies that did medical debt. And it’s an area where AGs have been extremely active, all kinds of lending to consumers, and of course in our economy with inflation and just the general economic challenges we’ve had really since the financial collapse in , AGs have made a specific focus and actually developed an expertise in looking out for scammers who are taking advantage of consumers who are put in a tight spot. And I completely agree with you, Keturah, that this is going to be a very live issue with student loan payments kicking back in because of the cancellation of the Biden Administration’s student loan forgiveness program. It’s also really interesting because it’s not just Minnesota that’s doing this. In fact, it’s not just Democrats who are doing this. I think Democrats sometimes get a bad rap for being really active in consumer protection or anti-business or however you want to put it. But this is one of those issues that, as we’ve talked about in other contexts, really are bipartisan. And you had even most recently, the South Carolina AG, Alan Wilson, who is a Republican, who is a very conservative Republican, recently warned consumers about potential increases in scams involving student debt, especially again in the aftermath of the decision in the Biden v. Nebraska case.

Keturah Taylor

Yeah, absolutely. And what was interesting about Attorney General Wilson’s warning is that it was issued in partnership with the FCC’s robocall response team. So that’s another great example of how state AGs and federal agencies will partner on all sorts of consumer protection issues, particularly robocalls, consumer scams, things like that. So I’m sure we’ll see the FTC and the CFPB also issuing consumer alerts or even taking enforcement actions in this space. I would also note that it’s not just the, quote, unquote, “scammers” or the companies who are directly engaging in these practices that should be aware of these actions. It’s also other companies that are providing services to debt relief providers. So for example, Attorney General Ellison’s letters that he issued this last week requested all the normal information like what products or services were being offered to consumers and identifying the customers of each company. But they also request information regarding CRMs or customer relationship management programs used by those target companies. So as you and I have seen in prior investigations, when an AG wants you to identify a third party company like that, it usually means that they’ll later send another request for information to that company. So I would say CRM companies that are providing services to debt relief providers should certainly keep an eye out for letters like that and be thoughtful in their response.

Chris Allen

Oh yeah, AG consumer protection divisions love them some mission creep. So one domino leads to the next domino, leads to the next domino. But yeah, I mean, it’s also interesting because you see that a lot in many AG contexts. The office will start with somebody who may be the closest to touching the consumer, but then they’ll realize that actually the most effective choke point in regulating that industry is actually to go to somebody behind them. So a service provider, somebody who’s doing customer lists. And I think it is a reflection of just how nimble they can be, but also how creative they can be when they’re focusing on industries that they’re interested in or that they think may have a significant impact on consumers.

Keturah Taylor

Certainly. And I think it makes sense from a technical perspective as well, because those provider companies often hold the personal data of the customers that are involved. And so that’s another reason that third party request recipients need to be really careful about their response because they’re often dealing with really sensitive customer information, as you can only imagine with student loan debt.

Chris Allen

That’s a fantastic point, and as you and I both know from several of the matters we’re working on, data privacy and the protection of consumer debt is something that is extremely important to AGs. I mean, AGs in the United States at least are the national leaders in this area.

Keturah Taylor

Absolutely.

Chris Allen

And it is something else we talked about in terms of policing industries, is that when you get behind just the issue of student debt and student debt collection, just generally education in student loans is something that AGs have been very, very interested in. They were highly, and continue to be highly involved, in the Department of Education’s ongoing rulemaking about the income driven repayment program, which allows students to tailor, I believe, tailor their student loan repayments based on their income. They also have been incredibly involved in some of the borrower defense to repayment rules where students have been able to allege that because supposedly they were misled by for-profit colleges, their student loans should be forgiven. And that by itself is just like another facet of the overall complete reshaping of the education industry, certainly the for-profit education industry that’s been driven almost exclusively by AGs; some FTC action, but the AGs really were in the driver’s seat here.

Chris Allen

I should say, I represent a for-profit college, so I won’t go into individual details here, but I think anybody who just googles, has been following this issue at all or even just goes and searches the issue, you can see how many for-profit colleges in particular were either driven out of business by AGs or forced to either become nonprofits or work very closely with AGs to develop robust compliance measures that have allowed them to survive. But I mean like telecommunications, like pharmaceuticals, like financial services, this is an industry where the AGs wielding their consumer protection authority have just had an incredible effect in transforming the entire way these entities do business.

Keturah Taylor

For sure. And I’ve also found it interesting to see the different approaches that AGs have taken when tackling that issue with for-profit colleges. So we see AGs take creative approaches all the time. They don’t always start an investigation or sue a company. Sometimes they influence federal policy, sometimes they propose different measures to the legislature on an issue that they’re particularly interested in. But in the student loan space, there was one action where California Attorney General Bonta, he sued a for-profit university and won a significant $ million civil penalty in court. And it was then based on that win and the evidence that AG Bonta’s team presented, that the Department of Education then later discharged another $ million in borrower debt incurred at the same institution. So you can see that ripple effect that the AGs action will have.

Keturah Taylor

And in another approach, a coalition of, I think it was  attorneys general back in , they petitioned the Department of Education to discharge a huge amount of federal student debt incurred at a separate for-profit institution, and the Department of Education granted that petition. So there’s different procedural tactics that AGs have taken to tackle this issue, but they’re certainly focused on it and they’ve been quite successful in their efforts so far.

Chris Allen

Yeah, that’s a great point and I think that another point just worth raising is, and maybe this is to step back from our listeners who hopefully are still listening and maybe not be involved in student debt or education. This is not just again, a student debt, this is not just about student loans. I think this is, again, with inflation squeezing the entire economy, with all of the different demands on people’s personal finances, AGs are going to be looking at all lenders. That’s just where we are right now. It’s where we’ve been, again, since the financial crisis. They were the ones who took on the big mortgage servicers. Since then, they’ve looked at other financial companies, they’ve looked at banks, they’ve looked at credit card issuers, they’ve looked at car finance companies, they’ve looked at short-term and payday lenders. This is not going to stop. I think we’re entering another period where, again, as you look at the employment numbers, maybe the job market is starting to calcify a little bit.

Chris Allen

Anybody who offers financial services to consumers, whether that’s offering them direct financing, whether that’s offering them debt relief, whether it’s offering them any kind of ability to engage, to service their own financial needs, is going to have to be very careful and check their compliance with respect to the disclosures they’re making, with respect to the fairness of their terms, with respect to how they’re marketing their services, and just really make sure from a legal and compliance standpoint, they’re buttoned up. Because the AGs are going to be out there and they’re going to be using their very broad consumer protection authority across all of these industries.

Chris Allen

If you are involved in anything that touches consumers or touches companies that touch consumers, there is exposure to state AGs, especially in areas like this that are not just areas where public policy and politics and legal issues all converge, but become really, really, really personal for people. Because people take out student loans hoping to make their lives better, and then when they run into difficulties, they are very, very compassionate cases for AGs to assert their consumer protection authority on their behalf. It’s been a fascinating conversation. Thank you very much, Keturah, for talking with me about this. Thank you for sharing your excellent insight on this, and we look forward to having you back on another episode.

Keturah Taylor

Thanks, Chris. It’s been great to be here, and I’m sure I’ll be back on soon.

Chris Allen

Great. Well, that’s been this edition of State AG Pulse, everybody stay safe and healthy out there, and we hope you join us for our next episode. Thanks.

Keturah Taylor

You’ve been listening to State AG Pulse, brought to you by Cozen O’Connor’s State AG Group and the State AG Report. Please leave us a five star rating and of course, tune in again next week.