SfJ COMMONWEALTH OF VIRGINIA STATE CORPORATION COMMISSION „ SCC-CLERK'S OFFICE ^ DOCUMENT CONTROL CENTER § Z0I5 NOV 30 P 2= 50 , © AT RICHMOND, NOVEMBER 30, 2015 PETITION OF ANDERSON FINANCIAL SERVICES, LLC LOAN MAX d/b/a LOAN MAX CASE NO. B fc-amS-o& O i f l Q PETITION TO PREVENT DISCLOSURE OF INFORMATION The petitioner, Anderson Financial Services, LLC Loan Max d/b/a Loan Max ("Loan Max"), by counsel and pursuant to the Commission's letter of November 19, 2015, respectfully submits tliis petition to prevent the disclosure of information Loan Max provided to the Commission. Should the Commission be inclined to change its practice and allow the disclosure of information Loan Max provided to the Commission, Loan Max respectfully requests that no disclosure be made until there is a hearing on this matter and all other remedies, including an appeal to the Supreme Court of Virginia, have been exhausted. I. Identity of the Parties Loan Max is a limited liability company regulated in the Commonwealth of Virginia by the Commission's Bureau of Financial Institutions as a motor vehicle title lender. Upon information and belief, the Center for Public Integrity ("the Center") is an investigative news organization in Washington, D.C. II. See http://www.publicintem-itv.oru/. Statement of Action Sought and Legal Basis for the Commission's Jurisdiction According to the Commission's November 19, 2015, letter to Loan Max, the Center has requested from the Commission a copy of the 2014 Annual Report Loan Max filed with the Commission. Pursuant to Code § 6.2-2210, Loan Max is required to file an annual report with 1 d m P the Commission. Pursuant to Code § 6.2-101, Loan Max respectfully requests that no portion of the 2014 Annual Report, and no specific infonnation regarding Loan Max, be produced to the Center as the 2014 Annual Report and the information it contains is not public information and is considered by Loan Max to be confidential information. Alternatively, should the Commission be inclined to alter its current practice regarding the production of reports like the 2014 Annual Report, Loan Max respectfully requests that Loan Max be allowed to submit a redacted version of the 2014 Annual Report to the Commission that may be produced to the Center. The legal basis for the Commission's jurisdiction to determine whether to produce any part of, or any information contained in, Loan Max's 2014 Annual Report is Code § 6.2-101, Code § 12.1-19, and 5 VAC 5-20-100. III. Statement of Facts On November 19, 2015, the Commission's Bureau of Financial Institutions informed Loan Max by written notice that it received a request on November 12, 2015 from the Center seeking a copy of Loan Max's 2014 Annual Report file filed with the Commission. The Center's request of the Commission was made pursuant to Code § 6.2-2210 and, according to the Commission, "came as a media inquiry to the Commission's Division of Infonnation Resources." In its letter to Loan Max, the Commission stated that it is "unable to identify a statutory or other legal basis that would prohibit the Bureau from treating your company's annual report (including its attachments) as a public record." The Commission's letter then notified Loan Max of its option to file a petition to contest this decision no later than November 30, 2015. 2 eg) © ^ © ^ JUNLL IV. Statement of Legal Basis ^ Loan Max understands that the Commission's practice is to provide information from the ^ © annual reports submitted by motor vehicle title lenders on a consolidated basis only. Loan Max understands that the Commission does not produce annual reports or company-specific information. This practice should continue for at least three reasons. 1. The 2014 Annual Report is Not Required to be Disclosed The Commission's current practice recognizes that the Virginia Freedom of Information Act, Code §§ 2.2-3700 through 2.2-3714, does not apply to the Commission or any of its entities.1 See, e.g., Code § 12.1-19(C); Christian v. SCC, 282 Va. 392 (2011); Gannonv. SCC, 243 Va. 480 (1992); Atlas Underwriters, Ltd. v. SCC, 237 Va. 45 (1989). See also Va. Dep'l of Corr. v. Surovell, 2015 Va. LEXIS 107 (Sept. 17, 2015) (citing Christian, discussing exemptions from VFOIA, reversing circuit court's judgment requiring VDOC to produce documents, and remanding for further proceedings).2 This is confirmed by the Advisory Opinions of the Virginia Freedom of Information Act Council. See AO-04-12 and AO-6-OO. Because the law is clear that VFOIA does not apply to the Commission (and therefore the Bureau), Loan Max submits this alone should end the inquiry as to whether the Bureau should alter its historical practice and now produce Loan Max's 2014 Annual Report or any Loan Max company-specific information in response to the inquiry from the Center.3 1 Furthermore, in addition to the fact that VFOIA does not apply to the Commission, because the Center is a foreign entity, the Commission is under no obligation to respond its request. See McBurney v. Young, 133 S. Ct. 1709 (2013). 2 In 2013, House Bill 2321 was introduced in response to Christian. The bill did not pass. 3 The Commission is required to produce "records related to the administrative activities of the Commission." Code § I2.I-19(C)(I). But, the 2014 Annual Report clearly is not included in the definition of "administrative activities" found in Code § 12.1-I9(C)(5). 3 ^ 2. The 2014 Annual Report is a Confidential, Non-Disclosable Regulatory Record h* ifi p ^ Should the inapplicability of the VFOIA not be enough to resolve this question, the ^ confidentiality provisions contained in Title 6.2 of the Code of Virginia provide further support for adhering to the Bureau's historical practice and producing only consolidated, aggregated information and not company-specific information. There is a general statement in Code § 12.119(C)(3) that provides "[rjecords held by the clerk of the Commission related to business entities shall be made public or held confidential in accordance with laws and regulations applicable specifically to such records." As the Commission is aware, the Code is interpreted in such a way that specific provisions control general provisions. See, e.g., Conger v. Barrett, 280 Va. 627, 630-31 (2010). Here, the specific provisions in Chapter 22 of Title 6.2 control the general statement found in Code § 12.1-19(C)(3). Code § 6.2-100 provides general definitions that apply throughout Title 6.2, "unless the context otherwise requires." In addition to clarifying the definition of "Bureau" and "Commission," this section defines "Entity," "Financial Institution," and "Person." Importantly, "Person" is defined as "any individual, corporation, partnership, association, cooperative, limited liability company, trust, joint venture, government, political subdivision, or other legal or commercial entity." Code § 6.2-101 provides for the protection of information furnished to the Commission and states: Except as otherwise provided in this title or § 12.1-19, the following shall not be disclosed by the Commission or any of its employees: (i) a report of examination of any person subject to this title, including any contents thereof; (ii) any information furnished to or obtained by the Bureau, the disclosure of which, in the opinion of the Commissioner, could endanger the safety and soundness of a bank, savings institution, or credit union; or (iii) any personal financial information furnished to, or obtained by the Bureau. 4 ® Url Code § 6.2-101 (A). The information provided by Loan Max in its 2014 Annual Report is a ^ <83 report protected by Code § .6-2-101 (A). Furthermore, because Loan Max is a "person," as <9 defined in Code § 6.2-100, its "personal financial information furnished to, or obtained by the Bureau" cannot be disclosed. There is nothing in Chapter 22 of Title 6.2 that abrogates these protections. Indeed, because it is required under Code § 6.2-2210, the 2014 Annual Report is exactly the type of regulatory record that should enjoy the maximum confidentiality protections afforded by the Commission and required by the General Assembly. 3. Strong Policy Reasons Support the Commission's Current Practice There are strong policy reasons for the Bureau to adhere to its historical practice and not produce or provide company-specific information like Loan Max's 2014 Annual Report. First, the mission statement of the Commission indicates that the Commission "will strive to apply law and regulation to balance the interests of citizens, businesses, and customers in regulating Virginia's business and economic concerns and work continually to improve the regulatory and administrative processes." Historically, as part of this balancing, the Commission and the Bureau have done a superb job collecting individual, company-specific information and then aggregating it so that only a consolidated report is publicly available. By treating companyspecific information as confidential and proprietary, the Bureau has created the type of regulatory environment that promotes and fosters trust and transparency in its interactions with the depository or non-depository financial institutions doing business in the Commonwealth. The Commission's practice should remain unchanged. Second, in the other States where it conducts business, Loan Max is not aware of any allowance for the production, whether through a FOIA-type request or otherwise, of its company-specific infonnation. All such information is protected and cannot be released by the 5 ^ p m p regulator to the public. This makes perfect practical sense. A contrary rule would foster an N5 fj&i <& environment where competitors might attempt to gain confidential, proprietary information through FOlA-type requests, or where financial institutions did not trust regulators (or vice versa). Third, should the Commission be inclined to alter its historical practice and allow production of the 2014 Annual Report, it appears that disclosure of the 2014 Annual Report may violate the Virginia Govemnrent Data Collection and Dissemination Practices Act, Code §§ 2.23800 through 3809. At best, a redacted version of the 2014 Annual Report should be produced to ensure compliance with this Act. Fourth, should the Commission alter its historical practice, the Commission should not single out motor vehicle title lenders. Detailed rules and procedures should be articulated that would apply to all entities regulated by the Bureau (or even all entities regulated by the Commission), with appropriate time for public comment and possible legislative amendments, before any change in the Commission's practice occurs. Until such time, however, Loan Max respectfully suggests that the Commission refrain from producing its 2014 Annual Report or any company-specific information regarding Loan Max. Finally, assuming the company-specific information possessed by the Bureau (whether for Loan Max or any other depository or non-depository financial institution) might be produced by the Commission, it is exactly the type of information excluded from production in Code § 2.23705.6. The information provided by Loan Max to the Bureau, whether through its 2014 Annual Report or otherwise, are trade secrets as defined in the Uniform Trade Secrets Act, Code §§ 59.1-336 through 59.1-343. A "trade secret" is information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that: (1) derives 6 ^ €3 ® & w t* independent economic value, actual or potential, from not being generally known to, and not H5 being readily ascertainable by proper means by, other persons who can obtain economic value •fiS ^ <& from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Code§ 59.1-336. Taken together, all of the information contained in the 2014 Annual Report qualifies as trade secrets because it is information with an independent economic value that is not generally known or readily ascertainable to Loan Max's actual or potential competitors. Specifically, the responses to the questions in "Section II," and the Profit and Loss Statement for 2014 contain sensitive financial and proprietary information regarding motor vehicle title loans made by Loan Max during 2014, specific data regarding the annual percentage rates, terms, loan amounts, number of borrowers, delinquent accounts and repossessions, and detailed breakdowns of the assets, liabilities, and equity of Loan Max. This information holds significant "independent economic value" to Loan Max because, as a non-public company, its profits and losses, for instance, are not "generally known" and are not "readily ascertainable" to its competitors or the public Code § 59.1-336. Disclosing these trade secrets would easily allow Loan Max's competitors to determine its margins, how it allocates its resources, and the size of its customer base. In addition, the information contained in "Response to Question 10" contains a list of confidential regulatory actions against Loan Max in various states. Disclosure of this information would put Loan Max at a competitive disadvantage because it would allow Loan Max's competitors to see states in which Loan Max is at increased risk for regulatory scrutiny due to past regulatory action. Loan Max fears that disclosure of the information contained in 7 ® m Question 10, along with all of the information in its 2014 Annual Report, might create unforeseen antitrust problems for Loan Max and other motor vehicle title lenders. In sum, the wholesale disclosure of sensitive financial, proprietary, and regulatory information is unwarranted under the Uniform Trade Secrets Act and would put Loan Max at a competitive and economic disadvantage for the reasons outlined above. Based on Code § 6.2101, discussed above, as well as the Commission's historical practice, Loan Max has operated under the belief that the information it provides to the Bureau will be treated as confidential and proprietary, and would not be disclosed except in a consolidated or aggregated manner. Going forward, Loan Max is prepared to affirmatively invoice the protections of the Uniform Trade Secrets Act in order to ensure that its company-specific information is not disclosed by the Bureau or any other entity of the Commission. V. Conclusion For the foregoing reasons, the Commission should adhere to past practice and not produce Loan Max's 2014 Annual Report, or any specific information regarding Loan Max, as the annual report and the company-specific information contained in Loan Max's 2014 Annual Report is "confidential information" pursuant to Code § 6.2-101. If the Commission decides to alter this practice, or is otherwise inclined to produce what Loan Max considers confidential information, Loan Max respectfully requests that it be afforded the opportunity to present a redacted copy of its 2014 Annual Report to the Commission after a hearing on this petition. 8 © , b © ® Un! & Dated: 30 November 2015 Respectfully submitted, KJ & m & @) Christopher R. Nolen (VSB No. 44404) Robert W. Loftin (VSB No. 68377) Steven G. Popps (VSB No. 80817) MCGUIREWOODS LLP Gateway Plaza 800 East Canal Street Richmond, Virginia 23219 Telephone: (804) 775-1000 Facsimile: (804)775-1061 cnolen@,mcguirewoods.com rloftin@mcguirewoods.com spoDPS @mcguirewoods.com 9 CERTIFICATE OF SERVICE I certify that, on this 30th day of November, 2015, an original and fifteen copies of the foregoing were hand-filed in the Clerk's Office of the State Corporation Commission. 10