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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 Publishes Two RFIs Concerning Free Access to Credit Scores

    Consumer Finance

    On November 13, the CFPB’s Office of Financial Education (OFE) published two requests for information (RFI) in the Federal Register concerning free access to credit scores. The first RFI requests information related to (i) consumers’ experience when accessing free credit scores, and (ii) the experience of companies and nonprofits when offering free access to credit scores to their customers and the general public. The Bureau plans to use the information gathered through the RFI to, among other things, “identify educational content that is providing the most value to consumers, and additional educational content that the Bureau or others could develop to increase consumers’ understanding of credit scores and credit reports.” Comments must be received by February 12, 2018.

    The second RFI requests information on companies that provide existing customers free access to a credit score.  This information will be used to update OFE’s March 2017 list of companies that offer this service. (See previous InfoBytes coverage here.) Following its update to the list, the CFPB intends to publish information “to educate consumers about the availability of credit scores and credit reports and how this information can be used effectively.” Comments must be received by January 12, 2018.

    Consumer Finance CFPB Credit Scores Federal Register

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  • DOJ Sues Washington State Company for Alleged SCRA Violations

    Consumer Finance

    On November 9, the DOJ filed a complaint in the Western District of Washington against a Washington company for allegedly foreclosing on servicemembers’ homes in violation of the Servicemembers Civil Relief Act (SCRA). According to the DOJ’s complaint, its investigation uncovered at least 28 unlawful non-judicial foreclosures. In addition to a declaration that the company violated the SCRA, the DOJ is seeking monetary damages, a civil penalty, and injunctive relief.

    The allegations stem from an investigation the DOJ initiated into the company’s foreclosure practices following the same court’s dismissal of a private SCRA action brought by a veteran on the ground that it was time-barred. Prior to the DOJ initiating the investigation, the veteran appealed the dismissal to the Ninth Circuit Court of Appeals. The DOJ filed an amicus brief in that appeal, arguing that private SCRA suits are governed by the four-year federal catch-all statute of limitations.

    Consumer Finance DOJ SCRA Foreclosure Mortgages

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  • 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

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  • CFPB Takes Action Against Largest Debt Settlement Provider

    Consumer Finance

    On November 9, the CFPB announced the filing of a complaint against the largest debt settlement provider in the country and its co-CEO for allegedly deceiving consumers about its debt settlement services. According to the complaint, the defendants engaged in deceptive acts and practices in violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act by:

    • misleading consumers about the settlement provider’s ability to negotiate with creditors that the settlement provider knew maintained policies against working with settlement companies;
    • instructing consumers to mislead creditors when asked about their participation in a debt settlement program;
    • leading consumers to believe the defendants would negotiate on their behalf when, in fact, some consumers were only “coached” on how to negotiate settlements on their own;
    • misleading consumers by charging them the full fee when creditors stop collection efforts without the defendants taking any action despite advertising that the fee is only charged if settlement is negotiated by the settlement provider and payments begin under the terms of a settlement; and
    • failing to clearly and conspicuously disclose consumers’ rights to refunds from their deposit accounts if they leave the settlement program.

    The CFPB is seeking monetary relief, civil money penalties, and injunctive relief against the defendants.

    Consumer Finance CFPB Debt Collection Enforcement Debt Settlement Telemarketing Sales Rule CFPA

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  • Cordray Speaks at Consumer Advisory Board Meeting

    Consumer Finance

    On November 2, CFPB Director Richard Cordray delivered prepared remarks at the Consumer Advisory Board (CAB) Meeting in Tampa, Florida addressing, among other things, the new rule (Rule) covering payday loans and certain other installment products (previously covered by a Buckley Sandler Special Alert). Cordray indicated that the Rule is intended to reform a market where many borrowers end up rolling over their loans multiple times, incur fees, and have trouble ultimately paying off their original balance. Cordray encouraged the CAB to discuss the Rule, noting the Bureau previously received over 1.4 million public comments on the proposal. Cordray also touched on topics regarding (i) financial security of older consumers, including reverse mortgages; (ii) complexities with delivering products to consumers with limited English proficiency ; and (iii) the Bureau’s September report, “Financial Well-Being in America,” which discussed the results of a nationwide survey measuring individual financial well-being.

    Consumer Finance CFPB Payday Lending Reverse Mortgages

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  • CFPB Reports Increase in Longer-Term Auto Loans

    Consumer Finance

    On November 1, the CFPB released a report finding an increase in the number of auto loans with terms of six years or longer. Specifically, the report notes that these longer-term loans made up 42 percent of auto loans originated in 2017, an increase from 26 percent of auto loans originated in 2009. The report observes that, while longer-term loans may make monthly payments more affordable, it is not clear that consumers are “better off” or more likely to repay such loans because of the increased financing costs and larger amounts financed.

    The report is a product of the CFPB’s Consumer Credit Trends tool (previously covered by InfoBytes) – a web-based resource that collects data on the auto finance, credit card, mortgage, and student loan markets. The tool’s data is drawn from a “nationally representative sample of credit records” kept by one of the top three U.S. credit reporting companies.

    Consumer Finance CFPB Auto Finance

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  • 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

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  • Illinois AG and FTC Reach $9 Million Settlement With Phantom Debt Collector

    Consumer Finance

    On October 31, Illinois Attorney General Lisa Madigan and the Federal Trade Commission (FTC) announced settlements with three operators of a fake debt collection scheme in Chicago. According to the Attorney General’s office, the three individuals and associated companies identified people who had recently applied for or received a short-term loan and then posed as a law firm to collect on the debt. The companies also sold fictitious loan debt portfolios to other debt buyers, who then attempted to collect on the fake debts. The settlements require the operators to surrender at least $9 million in assets (which will be used to refund impacted consumers) and, among other things, ban them from the debt collection business and from selling debt portfolios.

    Consumer Finance State AG FTC Debt Collection Payday Lending Enforcement Settlement

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  • CFPB Releases Web-Based Tool to Track Trends in Mortgage Delinquency Rates

    Consumer Finance

    On October 30, the CFPB announced the release of a “Mortgage Performance Trends” tool that tracks delinquency rates across the nation. The tool is comprised of data from the National Mortgage Database (jointly launched by the CFPB and the FHFA in 2012) and tracks monthly changes in delinquencies in two categories – borrowers who are 30-89 days delinquent and borrowers who are 90 or more days delinquent. The tool is interactive and contains national-level data as well as data for all 50 states and the District of Columbia. According to the Bureau’s press release, the tool shows that national mortgage rates of serious delinquency rates are at their lowest level since the financial crisis.

    Consumer Finance CFPB Mortgages Federal Issues FHFA

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