Skip to main content
Menu Icon Menu Icon
Close

InfoBytes Blog

Financial Services Law Insights and Observations
Section Content

Upcoming Events

Filter

Subscribe to our InfoBytes Blog weekly newsletter for news affecting the financial services industry.

  • FTC announces charges against mortgage loan modification operation

    Consumer Finance

    On January 19, the FTC issued a press release announcing charges against a mortgage loan modification operation for allegedly violating the FTC Act and the Mortgage Assistance Relief Services Rule by making false promises to consumers for services designed to prevent foreclosures or reduce interest rates or monthly mortgage payments. According to the charges, the defendants contacted consumers using doctored government logos on correspondence, which misrepresented an affiliation with the government’s Making Home Affordable loan modification program. Additionally, the defendants allegedly made unlawful claims that they had “special relationships with particular lenders” and instructed consumers to stop paying their mortgages without actually obtaining the promised loan modifications. As alleged by the FTC, this resulted in many consumers paying substantial interest charges, incurring penalties for paying the defendants rather than making mortgage payments, and in some instances, losing their homes to foreclosure. On January 10, a federal judge in the U.S. District Court for the District of Nevada temporarily restrained and enjoined the defendants’ alleged illegal practices and froze their assets at the request of the FTC.

    Consumer Finance FTC Mortgages FTC Act

    Share page with AddThis
  • FTC Settles With Dallas Auto Dealer for Alleged Deceptive Advertisements

    Lending

    On December 1, the FTC announced a proposed order to settle with a Dallas, Texas auto dealership for alleged deceptive advertisements containing loan and lease terms in Spanish-language newspapers. According to the FTC, the dealership violated the FTC Act by prominently displaying advantageous loan and lease terms in Spanish and qualifying those terms in smaller-print English at the bottom of the page. The FTC alleges the dealership misrepresented (i) the total cost of purchasing or leasing; (ii) the underwriting restrictions for the advertised loan or lease; and (iii) the availability of the inventory advertised. Additionally, the FTC alleged that the dealership violated Truth in Lending Act and the Consumer Leasing Act by failing to “clearly and conspicuously” disclose credit and lease terms. The proposal requires the dealership to cease the allegedly deceptive conduct and comply with all applicable advertisement regulations in the future. The proposal is published in the Federal Register and is open for public comment until January 2, 2018.

    Lending Auto Finance FTC Settlement FTC Act TILA CLA Federal Register

    Share page with AddThis
  • Fed Fines Kansas State Bank for Alleged Deceptive Mortgage Acts

    Consumer Finance

    On November 28, the Federal Reserve Board (Fed) announced it had entered into a consent order with a Kansas state bank over allegations that the bank engaged in deceptive mortgage origination practices in violation of the FTC Act. Specifically, the order alleges that the bank told borrowers that they were paying for discount points that would lower their interest rate, but did not in fact provide those borrowers an interest rate reflective of the price paid for the discount points or, in some cases, a reduced rate at all. The Fed’s order requires the bank to pay restitution to the affected borrowers, but did not impose a further civil money penalty. The bank has decided to terminate all operations of its national mortgage business by year-end 2017.

    Consumer Finance Federal Reserve Mortgages FTC Act Settlement

    Share page with AddThis
  • FTC Files Complaint Against Debt Collection Business for Alleged Violations of FTC Act, FDCPA

    Consumer Finance

    On November 8, the FTC issued a press release announcing charges against a Georgia-based debt collection business for allegedly violating the FTC Act by making false, unsubstantiated, or misleading claims to trick consumers into paying debt they did not actually owe. In the complaint, the FTC alleged defendants threatened legal action, garnishment, and imprisonment if the purported debt was not paid, and in other instances, attempted to collect debts after consumers provided proof the debt was paid off. Additionally, the defendants allegedly violated the Fair Debt Collection Practice Act (FDCPA) by (i) making false, deceptive, or misleading representations, including withholding the true status of the debt, threatening legal action or imprisonment, and failing to disclose they were debt collectors; (ii) engaging in unlawful third-party communications without obtaining prior consumer consent; and (iii) failing to provide consumers written verification of their debt within the required time frame. According to the FTC, defendants have collected more than $3.4 million from consumers since January 2015. A federal judge in the U.S. District Court for the Northern District of Georgia has temporarily restrained and enjoined the defendants’ alleged illegal practices and frozen their assets.

    Consumer Finance FTC Debt Collection Enforcement FTC Act FDCPA

    Share page with AddThis
  • Federal Reserve Board Issues Consent Order for the Alleged Deceptive Marketing of Balance Transfer Credit Cards

    Consumer Finance

    On October 26, the Federal Reserve Board (Fed) announced it had entered into a consent order with Mid America Bank & Trust Company (Mid America) over allegations that the bank engaged in deceptive practices in violation of the FTC Act involving balance transfer credit cards issued to consumers through third party independent service organizations. On the same day, the Fed announced its approval of an application by Reliable Community Bankshares, Inc. to acquire Mid America’s holding company, Mid America Banking Corporation. The allegations pertain to the adequacy of marketing materials, disclosures and other customer communications that described certain terms of the balance transfer cards such as credit reporting, available credit, and application of the statute of limitations to transferred balances. The Fed’s order requires the bank to refund certain fees, account balances and payments to its cardholders and other non-monetary actions, including compliance program enhancements. The order did not impose a civil money penalty.

    Consumer Finance Credit Cards Settlement FTC Act Federal Reserve

    Share page with AddThis
  • FTC Obtains Default Judgment Against Operations That Allegedly Sold Counterfeit Payday Loan Debt Portfolios

    Consumer Finance

    On October 17, the FTC issued a press release announcing a default judgment in an action brought against two Kansas-based operations and their owner (defendants), who allegedly violated the Federal Trade Commission Act by selling lists of counterfeit payday loan debt portfolios to debt collectors. The allegations claimed that in numerous instances, the portfolios listed “loans that the identified lenders have not, in fact, made to the identified consumers,” and that the defendants “have not purchased, or otherwise obtained, any rights to collect loan debts originated by the lenders listed . . ., nor have they engaged in any transaction that authorizes them to collect, sell, distribute, or transfer any valid loans originated by those lenders.” As a result, numerous consumers were contacted by various debt collectors demanding repayment of the fake debts, and in some instances, consumers made payments to either stop the collection calls or because they feared becoming delinquent. Under the terms of the default judgment, the defendants (i) must pay more than $4.1 million as equitable monetary relief; (ii) are banned from handling sensitive financial information, such as “bank account numbers, credit or debit card numbers, or social security numbers”; and (iii) are prohibited from misrepresenting material facts.

    Consumer Finance FTC Enforcement Payday Lending Settlement Debt Collection FTC Act Regulator Enforcement

    Share page with AddThis
  • FTC Announces Two Separate Settlements to Resolve Allegedly Deceptive Telemarketing Schemes

    Consumer Finance

    On September 1, the FTC issued a press release announcing a settlement with a Utah-based operation and its owner (Defendants) to resolve allegations that the company had created merchant accounts to help telemarketers process consumer credit card transactions in violation of the Federal Trade Commission Act (FTC Act) and the Telemarketing Sales Rule (TSR). According to the complaint, Defendants nominated individuals to serve as “principals” of straw companies, which then were used to open merchant accounts to assist telemarketers who did not meet the requirements or standards for opening the accounts on their own. The telemarketers, in turn, allegedly deceived consumers by making false promises regarding business opportunities that they claimed would generate substantial income, and processed credit card payments from consumers using the straw company merchant accounts for the allegedly “worthless opportunities.” Under the terms of the order, Defendants are permanently banned from the payment processing business, including acting as an independent sales organization or sales agent, and must pay a judgment of more than $3 million. The FTC suspended the judgment due to the Defendants’ inability to pay, but noted that it “will become due immediately if [Defendants] are found to have misrepresented their financial condition.”

    Separately on August 31, the FTC announced that a default judgment had been issued in a pending action brought against the operators of a deceptive telemarketing scheme who allegedly targeted Spanish-speaking consumers by pretending to be affiliated with the Peruvian government and deceived consumers by giving the impression that the calls were from emergency responders or by people the consumers had provided as references. The allegations, which violated the FTC Act and the TSR, claimed that consumers were presented opportunities to participate in language courses at discounted prices and were misled about prizes they had won. When consumers declined to participate or cancelled delivery of the prizes, the telemarketers made “false and threatening” claims of “legal or financial consequences,” allegedly posing as lawyers or government officials. Under the terms of the default judgment, the telemarketers (i) are ordered to pay $6.3 million as equitable monetary relief; (ii) are banned from telemarketing activities; and (iii) prohibited from misrepresenting material facts.

    Consumer Finance FTC Enforcement Telemarketing Sales Rule FTC Act Settlement

    Share page with AddThis
  • FTC and 32 States Settle Charges with Computer Manufacturer Concerning Preinstalled Software that Allegedly Compromised Online Security

    Privacy, Cyber Risk & Data Security

    On September 5, the FTC announced that, along with 32 state attorneys general, it had entered into a consent order with a global computer manufacturer to settle charges that it had preloaded advertising software on certain laptops that compromised consumers’ security protections. According to a complaint filed by the FTC, as well as complaints filed by the state attorneys general (see New Jersey Attorney General’s complaint), the manufacturer allegedly began selling the preloaded laptops beginning in August 2014. The software program—using a technique known as a “man-in-the-middle”—was able to access and collect consumers’ personal information that was transmitted over the internet, including login credentials, social security numbers, financial details, medical information, and email communications, without the consumers’ permission. The process entailed replacing the security certificates of visited encrypted websites with the software’s own certificates that could be easily compromised. The digital certificate substitution created multiple security vulnerabilities, which, among other issues, prevented consumers’ browsers from warning users if they visited “potentially spoofed or malicious websites with invalid digital certificates.” The FTC noted in its complaint that “[t]his practice violated basic encryption key management principles because attackers could exploit this vulnerability to issue fraudulent digital certificates that would be trusted by consumers' browsers.”

    According to the complaints, the manufacturer allegedly (i) did not disclose to consumers prior to purchase that the problematic software had been installed; (iii) failed to warn consumers about the security vulnerability; and (iii) unfairly preinstalled software, which acted as a “man-in-the-middle” between consumers and visited websites—all of which are violations of state consumer protection laws and the Federal Trade Commission Act. The complaints further alleged that the manufacturer failed to provide consumers with an easy way to effectively opt out of the preinstalled software.

    The terms of the FTC consent order stipulate the following: (i) the manufacturer is prohibited from making misleading representations about any software feature; (ii) consumers must affirmatively grant consent before this type of software may be installed, and the manufacturer must provide instructions for consumers to revoke consent or opt out; and (iii) a comprehensive software security program must be developed and implemented to address new and existing software security risks and will be subject to third-party biennial assessments for the next 20 years. The judgment reached with the state attorneys general also imposes a $3.5 million settlement to be divided between the states.

    Privacy/Cyber Risk & Data Security State Attorney General Enforcement Settlement FTC Act

    Share page with AddThis
  • FTC Enters Consent Order with Final Defendant in Alleged 2015 Debt Collection Scheme

    Consumer Finance

    On August 30, the FTC announced a settlement banning the final defendant who had participated in a debt collection scheme from debt collection activities. The settlement stems from a 2015 action against three groups of defendants who allegedly violated the FTC Act and the Fair Debt Collection Practices Act (FDCPA) by engaging in the following activities, among others: (i) attempting to collect debts consumers claimed they did not owe; (ii) impersonating law enforcement to threaten non-compliant consumers with arrests and lawsuits; (iii) harassing friends, family members, and employees in an attempt to collect debts; and (iv) failing to identify themselves as debt collectors. (See previous InfoBytes summary here.) In 2016, the FTC reached separate settlements (here and here) against two of the three groups of debt collectors. In addition to banning the final defendant from debt collection activities, the 2017 action also imposes a $9.39 million judgment to be suspended due to the defendant’s inability to pay. However, the judgment will become immediately due if the defendant is found to have misstated his financial condition.

    Consumer Finance Debt Collection FTC Enforcement UDAAP FDCPA FTC Act

    Share page with AddThis
  • FTC Files Complaint Against Debt Collection Operation for FTC Act and FDCPA Violations

    Consumer Finance

    On August 29, the FTC issued a press release announcing charges against a North Carolina-based debt collection business (defendants) for allegedly using a variety of “trade names” that sound like law firms to threaten individuals if they failed to pay debt they did not actually owe or that the defendants had no right to collect. According to the complaint, the defendants violated the FTC Act by making false, unsubstantiated, or misleading representations regarding debt owed on payday loans or other debts and threatening legal action. Additionally, the defendants allegedly violated the Fair Debt Collection Practices Act by: (i) communicating with consumers “at times or places known or which should be known to be inconvenient to the consumer” or “at the consumer’s place of employment when Defendants knew or had reason to know that the consumer’s employer prohibits the consumer from receiving such communications”; (ii) engaging in “unlawful third-party communications” without obtaining prior consumer consent; (iii) participating in harassing and abusive collection practices; (iv) making false, deceptive, or misleading representations, including by withholding the true status of the debt, impersonating attorneys, threatening legal action, and failing to disclose they were debt collectors; and (v) failing to provide consumers written verification of their debt within the required time frame. A federal judge in the U.S. District Court for the Western District of North Carolina has temporarily restrained and enjoined the defendants’ alleged illegal practices and frozen their assets.

    Consumer Finance Debt Collection FTC Enforcement UDAAP FDCPA FTC Act

    Share page with AddThis

Pages