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  • FTC and Florida Attorney General settle with debt relief scammers

    Consumer Finance

    On April 12, the FTC and the Florida Attorney General announced an $85 million settlement with three individuals who allegedly sold fake debt relief services. As previously covered by InfoBytes, in May 2017, the FTC and the Florida Attorney General filed a complaint against the individuals for allegedly violating the FTC Act, the FTC’s Telemarketing Sales Rule, and the Florida Deceptive and Unfair Trade Practices Act. According to the complaint, consumers, after collectively paying hundreds or thousands of dollars a month for promised debt-consolidation services marketed by the individuals, discovered their debts were unpaid, their accounts had defaulted, and their credit scores damaged. Under the proposed orders (here and here), all three marketers are restrained and enjoined from “advertising, marketing, promoting, offering for sale, selling” credit repair products and services, debt relief products and services, and financial products and services. The $85 million judgment is held jointly and severally against each of the individuals with a suspended judgment for two if all material assets are surrendered. The judgment for the third individual, considered the ringleader of the operation, is not suspended and the individual is still required to surrender all material assets.

    Consumer Finance Federal Issues State Issues State Attorney General FDCPA Debt Collection FTC

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  • DOJ sues California subprime auto lender for alleged SCRA violations

    Consumer Finance

    On March 28, the DOJ filed a complaint in the Central District of California against a California-based indirect auto lending company (defendant) for allegedly repossessing servicemembers’ vehicles in violation of the Servicemembers Civil Relief Act (SCRA). The allegations stem from an investigation into the defendant’s practices after an Army Private submitted a complaint to the DOJ in 2016. The DOJ’s investigation concluded that the defendant repossessed the vehicle without obtaining a court order or confirming whether the servicemember was SCRA-protected. According to the DOJ’s complaint, its investigation revealed that the defendant allegedly failed to have policies or practices in place to verify borrowers’ military status before repossessing vehicles. As such, the DOJ believes that the defendant may have repossessed vehicles of other servicemembers without obtaining the necessary court others or verifying military status. The DOJ contends that the defendant’s conduct was “intentional, willful, and taken in disregard for the rights of servicemembers.” In addition to monetary damages, the DOJ seeks civil monetary penalties and injunctive relief.

    Consumer Finance DOJ SCRA Servicemembers Auto Finance Repossession

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  • CFPB and FTC issue annual report on 2017 debt collection activities

    Consumer Finance

    On March 20, the CFPB and the FTC issued an annual report to Congress on the agencies’ collective actions to combat illegal debt collection practices based on their shared enforcement responsibilities under the FDCPA. The report was released pursuant to a 2012 Memorandum of Understanding between the CFPB and the FTC that provides for coordination in enforcement, supervision, and consumer education. According to the report, the agencies’ actions against debt collectors include:

    • CFPB. In addition to handling approximately 84,500 debt collection complaints in 2017, the CFPB reports it resolved one FDCPA enforcement case (previously covered by InfoBytes here) and filed two other complaints alleging FDCPA violations (previously covered by InfoBytes here and here). The Bureau also notes it uncovered a number of actions that the agency’s examiners deemed to be violations of the FDCPA, such as impermissible communications with third parties and implying authorized users are responsible for debt on the account. As for the Bureau’s pending FDCPA rulemaking, the report notes that the CFPB is still considering feedback from stakeholders regarding the July 2016 outline of proposals under consideration.
    • FTC. The agency reports it obtained more than $64 million in judgments based on alleged violations of the FDCPA or the FTC Act and emphasized the FTC’s specific focus on phantom debt actions. In addition to working to educate consumers about their rights with regard to debt collection, the FTC emphasized multiple permanent injunctions, which prevent companies and individuals from working in the debt collection field again. As for research, the agency highlighted its July 2017 Military Consumer Financial Workshop, which covered debt collection as an issue faced by the military community (previously covered by InfoBytes here).

    Consumer Finance CFPB FTC Debt Collection FDCPA

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  • FTC and New York Attorney General announce orders banning debt collection operations from related activities

    Consumer Finance

    On March 22, the New York Attorney General’s office and the FTC announced settlements with the operators of an allegedly abusive debt collection scheme, resolving lawsuits filed in 2015. (See previous InfoBytes coverage here.) According to the FTC, the operators and associated companies allegedly violated the FTC Act, the Fair Debt Collection Practices Act, and New York state laws prohibiting deceptive acts and practices by using abusive language and making false threats that consumers would be arrested or sued in order to collect the supposed debts. The stipulated final orders impose combined judgments of over $48.7 million to be partially suspended upon the surrender of certain assets, including more than $1 million in corporate and individual assets. In addition to barring the operators from the debt collection business and from buying or selling debt, the orders further prohibit them from misrepresenting financial products and services or benefiting from consumers’ personal information collected in connection with the challenged practices.

    Consumer Finance FTC State Attorney General Debt Collection FTC Act FDCPA Settlement

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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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  • FTC announces resolution of an action against the final defendant in a debt collection operation

    Consumer Finance

    On March 5, the FTC announced that the U.S. District Court for the Middle District of Florida entered a default judgment against the final defendant of a debt collection operation accused of violating the FTC Act and Fair Debt Collections Practices Act by allegedly posing as lawyers and threating individuals with lawsuits or prison time if they failed to pay debt they did not actually owe. (See InfoBytes coverage here on previously issued order against three other co-defendants.) Under the terms of the January 23 order, the defendant is prohibited from, among other things, (i) engaging in debt collection activities; (ii) buying or selling consumer or commercial debt; (iii) misrepresenting material facts regarding financial-related products or services; (iv) misrepresenting an affiliation with an attorney or law firm; (v) disclosing, using, or benefiting from consumers’ personal information; and (vi) improperly disposing of consumers’ information. In addition, the court assessed a $702,059 fine, jointly and severally with the co-defendants.

    Consumer Finance FTC Debt Collection Settlement FTC Act FDCPA

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  • CFPB reviews removal of public records from credit reports

    Consumer Finance

    On February 22, the CFPB released a report finding that the removal of public records from consumer credit reports may have had an effect on consumers’ credit scores. The report reviewed the impact of the civil public records minimum information standards established pursuant to the National Consumer Assistance Plan (NCAP) – an initiative launched by the top three U.S. credit reporting agencies (CRAs) as a result of settlement agreements between the CRAs and over 30 state attorneys general. Starting in July 2017, the NCAP required public records furnished to the CRAs to include a name, address, and social security number and/or date of birth and required the records be refreshed every 90 days. According to the report, prior to the NCAP, six percent of consumers had a civil judgment or tax lien on their credit report; and after the NCAP implementation, the CFPB found that only 1.4 percent of consumers had a tax lien on their credit report and zero consumers had civil judgments. However, the report notes that while there was a significant drop in the overall reporting of public records, only six percent of those affected by the NCAP new reporting requirements, experienced an increase from “deep subprime or subprime credit scores in June before the standards took effect and rose to near prime or above in September.” The CFPB noted in a blog release that the Bureau cannot assess scoring-model accuracy because it requires two years of data following the implementation of new standards to perform the analysis.

    Consumer Finance CFPB Credit Reporting Agency

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  • District Court sanctions bankruptcy law firm for allegedly harming consumers and auto lenders

    Consumer Finance

    On February 12, following a four-day trial, the U.S. Bankruptcy Court for the Western District of Virginia entered a memorandum opinion to sanction and enjoin a national consumer bankruptcy law firm and its local partner attorneys (defendants) for “systematically engag[ing] in the unauthorized practice of law, provid[ing] inadequate representation to consumer debtor clients, and promot[ing] and participat[ing] in a scheme to convert auto lenders’ collateral and then misrepresent[ing] the nature of that scheme.” According to a DOJ press release, the combined order was entered in two actions consolidated for trial brought by the DOJ’s U.S. Trustee Program. The actions concern a Chicago-based law firm that offered legal services via its website to financially distressed consumers and allegedly had “non-attorney ‘client consultants’” engage in the unauthorized practice of law and employ “high-pressure sales tactics” when encouraging consumers to file for bankruptcy relief. Among other things, the defendants allegedly (i) refused to refund bankruptcy-related legal fees to clients for whom the firm failed to file bankruptcy cases; (ii) failed to have in place oversight and supervision procedures to prevent non-attorney salespeople from practicing law; and (iii) partnered with an Indiana-based towing company to implement a scheme that would allow clients to have their bankruptcy-related legal fees paid if they transferred vehicles “fully encumbered by auto lenders’ liens” to the towing company without lienholder consent. Under the “New Car Custody Program,” the towing company allegedly claimed rights to the vehicles, sold the vehicles at auction, paid the client’s bankruptcy fees to the defendants, and pocketed the proceeds. According to the release, this program “harmed auto lenders by converting collateral in which they had valid security interests,” and exposed clients to “undue risk by causing them to possibly violate the terms of their contracts with their auto lenders as well as state laws.”

    Under the terms of the order, the court sanctioned the defendants $250,000, imposed additional sanctions totaling $60,000 against the firm’s managing partner and affiliated partner attorneys, ordered the defendants to disgorge all funds “collected from the consumer debtors in both bankruptcy cases,” and revoked the defendants’ privileges to practice in the Western District of Virginia for various specified periods of time. The court also sanctioned the towing company and “ordered the turnover of all funds it received in connection” with the program. The towing company did not respond to the filed complaints.

    Consumer Finance DOJ Bankruptcy Auto Finance State Issues Courts

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  • FTC seeks permanent injunction to stop alleged student loan debt relief scam

    Consumer Finance

    On February 7, the FTC announced it was charging a student loan debt relief operation with violations of the FTC Act and the Telemarketing Sales Rule (TSR) for allegedly engaging in deceptive practices when marketing and selling their debt relief services. According to the complaint, defendants contacted consumers through personalized mailers that falsely claimed borrowers had pre-qualified for federal loan assistance programs that would reduce their monthly debt payments to a fixed payment or result in total loan forgiveness. However, the FTC asserted that monthly payments under federal income-driven repayment programs vary from year to year due to fluctuations in income, and that most consumers do not meet the programs’ strict eligibility requirements. Among other things, defendants allegedly charged illegal up-front fees to purportedly enroll consumers in programs, accepted monthly payments that were not applied towards student loans, and collected monthly fees that consumers believed were being applied to their loans but instead were going towards unrelated “financial education” programs. According to the FTC, defendants have collected over $28 million since 2014. In connection with the telemarketing of student loan debt relief services, the FTC also charged defendants with TSR violations for allegedly collecting illegal upfront fees and misrepresenting “material aspects of their debt relief services.” The FTC is seeking a permanent injunction against defendants to prevent future violations, as well as redress for injured consumers through “rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.”

    This action is part of the FTC’s enforcement initiative, Operation Game of Loans, which targets companies that engage in practices that harm student loan borrowers. (See previous InfoBytes coverage here.)

    Consumer Finance FTC Debt Relief Enforcement Student Lending

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  • FTC releases report on military consumer finance

    Consumer Finance

    On February 2, the FTC released a new Staff Perspective (perspective) which highlights takeaways from a July 2017 FTC workshop focused on examining the array of financial issues that may affect military consumers (defined as servicemembers, veterans, and their families). The perspective notes, among other things, that servicemembers may struggle during auto financing transactions because of a lack of time to shop and lack of credit history, which may result in disadvantageous credit terms. Additionally, the perspective highlights that debt collection problems may result in a servicemember not qualifying for a security clearance and that debt collectors may threaten to contact servicemembers’ commanding officers. The perspective also summarized the additional legal rights that may apply to military consumers, such as the Military Lending Act (MLA) and the Servicemembers Civil Relief Act (SCRA), and emphasized the FTC’s focus on financial education for servicemembers throughout the various stages of their military career.

    Consumer Finance FTC Debt Collection Military Lending Act Auto Finance SCRA

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