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  • District Court denies payment company’s request to set aside judgment


    On March 12, the U.S. District Court for the Northern District of California denied a company’s post-trial motions to set aside September 2017 judgments in a lawsuit brought by the CFPB for alleged violations of the Consumer Financial Protection Act (CFPA). Specifically, the bi-weekly payments company requested that the court set aside its injunction and reconsider a $7.93 million penalty in light of “new evidence” that demonstrated the company’s inability to pay the penalty. As previously covered by Infobytes, the CFPB filed the lawsuit in 2015, alleging, among other things, that the company made misrepresentations to consumers about its bi-weekly payment program by overstating the savings provided by the program and creating the impression the company was affiliated with the consumers’ lender. In denying the company’s motion, the court held that the company failed to present new evidence that would justify the relief. Additionally, the court rejected the argument that the permanent injunction placed on the company was overly burdensome, stating “in light of the evidence of defendants[’] prior practices…the limitations of the injunction reflect appropriate safeguards ‘to avoid deception of the consumer.’”

    Courts CFPB Payment Processors UDAAP CFPA

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  • FDIC fines Delaware-based bank for unfair and deceptive practices

    Consumer Finance

    On March 7, the FDIC announced that a Delaware-based bank agreed to settle allegations of unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission Act for assessing transaction fees in excess of what the bank previously had disclosed. The FDIC also found that the bank’s practices violated the Electronic Funds Transfer Act, the Truth in Savings Act, and the Electronic Signatures in Global and National Commerce Act. According to the FDIC, from December 2010 through November 2014, the bank overcharged transaction fees to consumers who used prepaid and certain reloadable debit cards to make point-of-sale, signature-based transactions that did not require the use of a personal identification number. The transaction fees allegedly exceeded what the bank had disclosed to consumers. Under the terms of the settlement order, the bank will, among other things, (i) establish a $1.3 million restitution fund for eligible consumers; (ii) prepare a comprehensive restitution plan and retain an independent auditor to determine compliance with that plan; and (iii) provide the FDIC with quarterly written progress reports detailing its compliance with the settlement order. The settlement also requires the bank to pay a civil money penalty of $2 million.

    Consumer Finance FDIC UDAAP FTC Act EFTA Prepaid Cards Settlement

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  • District judge enters final judgment against company posing as a direct lender; rules in favor of CFPB

    Consumer Finance

    On January 30, a federal judge for the U.S. District Court for the Southern District of New York ordered a New Jersey-based company along with two associated individuals (defendants) to pay civil money penalties totaling $75,000 for allegedly offering loans to consumers who were awaiting payouts from legal settlements or victim-compensation funds. As previously covered in InfoBytes, the order stems from a complaint filed against defendants for allegedly engaging in deceptive acts and practices in violation of the Consumer Financial Protection Act by purportedly representing itself as a direct lender, when in actuality it did not provide loans to consumers, but instead brokered transactions while charging a commission for the service. Defendants neither admitted nor denied the allegations in the complaint. In addition to civil money penalties, the order permanently bans defendants from participating either directly or indirectly in any activities related to funding post-settlement litigation or victim compensation funds.

    Consumer Finance CFPB Lending UDAAP CFPA Enforcement

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  • CFPB succession update: CFPB requests zero funding; seeks public comment regarding Bureau’s activities; & more

    Federal Issues

    On January 17, in a letter to Federal Reserve Chair Janet Yellen, acting CFPB Director Mick Mulvaney requested zero dollars for the Bureau’s quarterly operating funds. Each fiscal quarter, as required by law, the CFPB formally requests that the Federal Reserve transfer a specified amount of money to the Bureau so it can perform the functions outlined in its budget. In his letter, Mulvaney stated that the prior Director maintained a “reserve fund” for the CFPB, and the money in this fund is sufficient to cover the CFPB’s expenses for the second quarter. This will be the first time in the history of the CFPB that its Director has requested no additional amount to fund quarterly operations. The CFPB also announced its plan to publish a series of Requests for Information (RFIs) in the Federal Register seeking public input on the way the Bureau is performing its statutory obligations. These RFIs will request “comment on enforcement, supervision, rulemaking, market monitoring, and education activities.” The first RFI will seek information regarding the Bureau’s Civil Investigative Demand processes and procedures.

    On January 18, the CFPB voluntarily dismissed its case against four online installment lenders for allegedly deceiving customers by collecting debts that were not legally owed, previously covered by InfoBytes here. The complaint, filed in the United States District Court for the Northern District of Illinois, alleged, among other things, that the lenders engaged in unfair, abusive, and deceptive acts—a violation of the Dodd-Frank Act—by collecting on installment loans that are partially or wholly void under state law. In September 2017, the case was transferred to Kansas, where the Bureau’s notice of dismissal was filed. The notice does not specify a reason for the dismissal.

    Federal Issues CFPB Succession CFPB Enforcement CIDs Federal Reserve Federal Register UDAAP Installment Loans Debt Collection

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  • CFPB Fines Large Bank for Alleged Student Loan Servicing Issues


    On November 21, the CFPB announced it had entered into a consent order with a large national bank over allegations that the bank engaged in unfair and deceptive practices in violation of the Consumer Financial Protection Act of 2010 (CFPA) related to its student loan servicing activities. The order, which the bank consented to without admitting or denying the findings, asserts that for the student loan accounts it was servicing, the bank (i) misrepresented information to borrowers about tax benefits; (ii) failed to refund interest and fees inaccurately charged; (iii) misstated minimum monthly payment amounts in bills; and (iv) failed to provide required information when denying co-signer release requests. In addition to imposing a civil money penalty, the CFPB’s order requires the bank to pay restitution to certain consumers and implement certain policies.

    Lending Student Lending CFPB Enforcement UDAAP CFPA

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  • CFPB Fines Loan-Servicing Software Company $1.1 Million for Flaws Leading to the Reporting of Inaccurate Consumer Information

    Consumer Finance

    On November 17, the CFPB ordered a loan-servicing software company to pay a $1.1 million penalty for errors that resulted in the company furnishing incorrect consumer information related to over one million borrowers to the credit reporting agencies. The consent order alleges that the company violated the Consumer Financial Protection Act when its third-party software application generated and furnished inaccurate and incomplete information to consumer reporting agencies because of known software defects. The company allegedly did not share the existence of the defects with its auto-lender clients. In addition to the civil money penalty, the company was ordered to: (i) explain its errors to its clients; (ii) fix the faulty software; and (iii) provide the Bureau with a compliance plan outlining how it plans to identify and fix the defects, as well as ensure that the software is capable of reporting accurate information.

    Consumer Finance CFPB Enforcement Credit Reporting Agency Credit Scores CFPA UDAAP

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  • CFPB Initiates Complaint Against Company for Deceptive, Unfair, and Abusive Loan Collection Practices

    Consumer Finance

    On November 15, the CFPB announced it had filed a complaint against a Texas-based service provider, alleging that it had assisted in the collection of loans that were, in whole or in part, void under state law. The complaint filed in the U.S. District Court for the District of Montana alleges that the service provider, which provided services to three tribal lending entities engaged in the business of extending online installment loans and lines of credit, along with two companies responsible for the collection process (collectively defendants), assisted in the collection of loans that consumers were not legally obligated to pay based on identified states’ usury laws or licensing requirements. Although the specific claims vary by defendant, the complaint alleges that the defendants engaged in deceptive, unfair, and abusive acts and practices in violation of the Consumer Financial Protection Act (CFPA) by:

    • misrepresenting that consumers were responsible for money owed on loans that were void in whole or in part, or did not exist, because the loans were void under state licensing or usury laws (voided loans);
    • demanding repayment from consumers on voided loans by issuing “demand letters,” electronically debiting funds from consumer bank accounts, and placing phone calls to consumers;
    • failing to disclose to consumers that defendants had no legal right to collect on certain voided loans and that consumers were not legally obligated to repay the loans;
    • causing injury to consumers by servicing and collecting on the voided loans;
    • taking advantage of consumers’ “lack of understanding” regarding the voided loans; and
    • providing assistance in, or administering, the origination and collection of the voided loans.

    The CFPB is seeking monetary relief, civil money penalties, injunctive relief, and a prohibition of the service provider’s ability to commit future violations of the CFPA.

    Consumer Finance CFPB Debt Collection Installment Loans UDAAP CFPA

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  • CFPB Takes Action Against Debt Relief Companies for Allegedly Violating the TSR and Claiming to be Affiliated With the Federal Government

    Consumer Finance

    On October 12, the CFPB announced the filing of a complaint in the U.S. District Court for the District of Maryland against two companies, their service provider, and their owners (defendants) for allegedly misleading consumers about their debt validation program. According to the complaint, the defendants allegedly engaged in abusive and deceptive acts and practices in violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act by purportedly (i) charging advance fees for debt-relief services before altering the terms of the consumers’ debts or achieving promised results; (ii) misrepresenting the abilities of their debt-relief and credit-repair services; (iii) failing to disclose to consumer that if they stopped making payments on debts enrolled in the service they may be subject to collections or lawsuits from creditors that could increase the overall amount of money owed due to fees and interest; and (iv) misrepresenting an affiliation, endorsement, or sponsorship with the federal government by using direct mailers designed to look like an official government notice.

    Consumer Finance CFPB Debt Relief Enforcement CFPA Telemarketing Sales Rule UDAAP

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  • Massachusetts AG Takes Action Against Auto Dealer for Deceptive Marketing and Sales Tactics


    On September 26, Massachusetts Attorney General Maura Healey announced a lawsuit against a large auto dealership and its in-house lender for allegedly misleading consumers into purchasing unfavorable sale packages. According to the Commonwealth’s complaint, filed in the Suffolk County Superior Court, the auto dealer purportedly (i) sold consumers cars priced at more than double their retail value; (ii) extended loans to consumers with an APR of 20 percent, regardless of credit qualifications; and (iii) combined these sales with an expensive and limited service contract. The complaint further alleges that because of these sales practices and a faulty underwriting process, more than half of the auto dealer’s sales fail or end in repossession. The complaint seeks injunctive relief, restitution, civil penalties, and attorney fees.

    Lending State Attorney General UDAAP Auto Finance Enforcement Anti-Predatory Lending

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  • FTC Launches Military Task Force Website, CFPB Blog Post Discusses Servicemember Debt Collection Rights

    Consumer Finance

    On September 25, the FTC launched a new website to showcase the work of the agency’s Military Task Force. The Military Task Force identifies the needs of military consumers and their families and develops initiatives such as workshops that examine financial issues and scams more likely to affect military consumers or training for military attorneys, law enforcement personnel, and financial advisors. (See previous InfoBytes summaries here and here.) The FTC reported in a press release that in 2016, servicemembers, their dependents, military retirees, and veterans submitted more than 100,000 consumer complaints, with retirees and veterans comprising approximately two-thirds of the complaints. The top complaints were imposter scams, identity theft, and debt collection. The new webpage includes links to resources for servicemembers and veterans, workshops, related FTC cases and other initiatives, and congressional testimony.

    On September 22, the CFPB published a blog post to discuss servicemembers’ debt collection rights and resources. According to the Bureau, as of August 1, 41 percent of servicemember complaints were related to debt collection, as compared to 26 percent of non-servicemember complaints. The Fair Debt Collection Practices Act (FDCPA) protects servicemembers from debt collectors who use abusive, unfair, or deceptive practices to collect debts, but according to the Bureau, some military consumers claim they have received threats from debt collectors stating that they will report the debt to their commanding officer, have their rank reduced, or put their security clearance up for review. As the post notes, making false threats or disclosing debts to third parties without permission are violations of the FDCPA.

    Consumer Finance Servicemembers FTC CFPB FDCPA Consumer Complaints Debt Collection UDAAP

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