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Today’s Discussion Topics

Client Changes and Opportunities

Vendor Management Requirements and Technology Advancement

Major Macroeconomic Trends Impacting ARM

CFPB and Regulatory Updates: What to Expect

The Changing M&A Landscape

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Disclaimer

This information is not intended as legal or business advice and may not be used as such. Legal and business 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 this presentation. It is not intended to be a full and exhaustive explanation of the law in any area, nor may you use the information to replace the advice of your own legal counsel.

The presenters, Kaulkin Ginsberg and Ontario Systems assume no liability for

typographical or other errors contained in the presentation and materials or for changes in the law affecting anything discussed therein.

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0 20 40 60 80 100 120 0 200 400 600 800 1000 1200

Student Loans Growing with Increased

Collection Demand ($ Billion)

total student loan 90+ bad debt

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600 650 700 750 800 850 900 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Hospital Total Revenue and Revenue Per Physician

Visits

Revenue Revenue Per Physician Visit

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Top 5 States with Highest Bad Debt Top 5 States with Highest Delinquency Rate

California

Florida

Ohio

Nevada

New Jersey

New York

Illinois

New Jersey

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0 2 4 6 8 10 12 14 16

Financial Services

90+ Days Delinquent by Loan Type

Mortgage HELOC Auto Credit Card Student Loan All

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Vendor Management Requirements and Technology

Advancement

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Vendor Management

 CFPB’s new found focus on service providers and vendors

 CFPB Bulletin, April 12, 2013

 CFPB expects banks and nonbanks to have an effective process for managing the risks of service provider relationships

 Service provider defined:

• Any person that provides a material service to a covered person in connection with the offering or provision by such covered person of an consumer financial product or service

 Duties:

• Conduct due diligence to ensure compliance with consumer protection laws

• Review policies and procedures and training

• Include consumer protection expectations in contract

• Establish internal controls and monitoring

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Technology Advancements

 Technology will become an integrated part of your Compliance Management system

• Compliance Management System software application

• Complaint Tracker CL [Complaint solution]

• Manual Device [TCPA compliance]

• Validity [TCPA compliance]

• Speech analytics [FDCPA compliance]

• Fused solutions [State and federal requirements]

• Call recording [Creditor and CFPB compliance]

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-20 -15 -10 -5 0 5 10 15 20 0 2 4 6 8 10 12 14 16 18 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

Aggregate Household Debt

Household Debt % Change © Kaulkin Ginsberg Company

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Unemployment Rate

6.8 7 7.2 7.4 7.6 7.8 8 8.2 8.4

U3

© Kaulkin Ginsberg Company

13 13.2 13.4 13.6 13.8 14 14.2 14.4 14.6 14.8 15

U6

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The New Sheriff

CFPB - the new chief regulator of the

collection industry

FTC – the Quiet Giant

Business through the eyes of the

consumer

The CFPB examination process

Areas of focus

Field observations

Impact on operations

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Hot Topics

 TCPA – manual dial, consent per credit transaction, right number – wrong consumer

 Electronic Funds Transfers (EFTs) – authorization requirements for credit card, ACH debit transactions and E-checks

 Call recording – the $5000K phone call

 Email and text messages – unique consent requirements

 Disputes, inquiries and complaints

 FCRA takes center stage

 Debt collector discretion – the need for written guidelines

 Collector compensation and the new definition of the successful collector

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NCO Group Inc., 9.24% Encore Capital Group, 6.40% Following 3-5 firms, 15.37%

Other small and mid-size firms,

68.99%

ARM Industry Market Share in 2013

(Estimated)

*The 2013 revenue data is estimated based on the historical revenue and its growth rate.

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0 2 4 6 8 10 12 14 16 18 20

1st 6 Mo. 2011 2nd 6 Mo. 2011 1st 6 Mo. 2012 2nd 6 Mo. 2012 1st 6 Mo. 2013

ARM Deal Volume

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Size of Acquired Company ($ Revenues)

Multiples/Structure Small* (< $5M) Mid-Sized** ($5-$10M) Large** ($10-$25M) Platform** ($20M+)

Multiples 2-4X SDE 3-6X Adj. EBITDA 5-7X Adj. EBITDA 5-8X Adj. EBITDA Structure 0%-100% cash 25%-100% cash 50%-100% cash 50%-100% cash *SDE = Seller’s Discretionary Earnings (Seller compensation + expenses combined with EBITDA

**Adj. EBITDA (Earnings Before Interest, Taxes, Depreciation + Amortization adjusted for non-recurring expenses that would not exist post-transaction

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