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On May 30, the CFPB released the latest quarterly consumer credit trends report, which examines the fluctuations in consumers’ credit scores and the timing of consumers’ applications for credit. The report analyzes consumers whose credit scores showed large increases or decreases between 2009 and 2017. Key findings of the report include, (i) consumers with large credit score changes, in either direction, tend to be younger and have considerably lower credit scores on average; (ii) application rates drop sharply as credit scores reach their minimums, and then, after hitting bottom application rates trend steadily upward; and (iii) patterns in application rates generally hold regardless of the levels of minimum and maximum credit scores.
The report notes that while the Bureau did not perform “a full accounting of the underlying mechanism” that leads to the observed patterns, there are a few possible explanations, including (i) consumers are more aware of their credit scores due to the wider availability of them, which would influence timing of applications; (ii) hard inquiries and results from hard inquiries may contribute to the observed peaks and troughs in the scores; (iii) marketing practices by card issuers may contribute to increased applications after a consumer’s credit score qualifies the consumer for a prescreened offer.
On March 29, the CFPB published its Consumer Response Annual Report, providing a review of the Bureau’s complaint process and a description of complaints received from consumers from across all 50 states and the District of Columbia between January 1 and December 31, 2018. According to the report, the Bureau handled approximately 329,800 consumer complaints. Of these complaints, roughly 80 percent were submitted to companies for review and response, 14 percent were referred to other regulatory agencies, and four percent were determined to be incomplete. The top categories, representing approximately 89 percent of all complaints, were credit or consumer reporting, debt collection, mortgages, credit card, and checking or savings complaints. The Bureau also received complaints related to: (i) student, personal, and payday loans; (ii) money transfers and virtual currency; (iii) vehicle finance; (iv) prepaid cards; (v) credit repair; and (vi) title loans. As reported by the CFPB, the majority of consumers who submitted complaints indicated that they first tried to resolve their issues with the companies.
On March 19, the CFPB released the “Complaint Snapshot: Servicemembers, Veterans, and Military Families 50 State Report,” which provides state-specific data on the nearly 34,000 complaints received from servicemembers, veterans, and their families in 2018 (which the CFPB collectively defines as, “servicemember”). Specifically, for each state, the snapshot provides (i) the total number of servicemember complaints handled in 2018 and the percentage change since 2017; (ii) distribution of complaints by product for both servicemembers and non-servicemembers; (iii) distribution of complaints by branch of service; and (iv) a visual representation of complaints by zip code. Notably, servicemember complaints increased by 12 percent from 2017 to 2018. The states with the highest number of servicemember complaints include Texas, California, Florida, and Georgia. The Bureau has received over 133,000 complaints from servicemembers since 2011.
See recent article by Buckley attorneys, "Takeaways from military complaints at the CFPB."
On March 3, the 21st annual National Consumer Protection Week (NCPW) began. According to the FTC announcement, NCPW will run from March 3 through March 9 and aims to help consumers understand their rights while giving them access to free educational materials. The FTC, together with its federal, state and local partners, consumer groups, and other national advocacy organizations intend to provide advice on scams, identity theft, and other fraudulent business practices. A schedule of three specific social media events hosted by the FTC is provided in the announcement.
FTC settles with one student loan debt relief operation; seeks separate permanent injunction against another
On November 20, the FTC announced a settlement with operators of a student loan debt relief operation to resolve allegations that the defendants defrauded consumers through programs offering mortgage assistance and student debt relief. Regarding the student debt operations, the FTC alleged that the defendants falsely offered student borrowers reduced monthly payments or loan forgiveness by falsely claiming to be affiliated with the Department of Education. In a 2017 complaint, the FTC alleged that the defendants also falsely promised foreclosure prevention and mortgage relief to distressed homeowners, but instead collected advance fees in violation of the Telemarketing Sales Rule (TSR) and the Mortgage Assistance Relief Services Rule. Among other things, the settlement includes a judgment of more than $9 million—which will be partially suspended once the defendants turn over all assets worth approximately $305,000 because of their inability to pay—and bans the defendants from participating in debt relief and telemarketing activities in the future.
The same day, the FTC also announced it was charging a separate student loan debt relief operation with violations of the FTC Act and the TSR for allegedly engaging in deceptive practices when marketing and selling their debt relief services. According to the complaint, the operators of the scheme—which include a recidivist scammer previously banned from participating in debt relief activities—allegedly “promoted a 96 percent success rate in reducing consumers’ student loan payments.” However, the FTC stated that consumers who purchased the debt relief services and often paid illegal upfront fees “often did not receive any debt relief and lost hundreds of dollars.” On November 13, the U.S. District Court for the Central District of California issued a temporary restraining order and asset freeze at the FTC’s request. The FTC seeks a permanent injunction against the 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.”
On November 8, the FTC announced that the U.S. District Court for the District of Maryland has granted a temporary restraining order against the operators of an international real estate investment development, which the FTC claims is the “largest overseas real estate investment scam [it] has ever targeted.” According to the FTC’s complaint, the defendants violated the FTC Act and the Telemarketing Sales Rule by advertising and selling parcels of land that were part of a luxury development in Belize through the use of deceptive tactics and claims. The FTC contends that consumers who purchased lots in the development purchased the lots outright or made large down payments and sizeable monthly payments, and paid monthly homeowners association fees, and that defendants used the money received from these payments to fund their “high-end lifestyles,” rather than to invest in the development. In addition, the FTC asserts that, while the defendants falsely promised consumers that their lots would include luxury amenities, be completed soon, and result in property values that would “rapidly appreciate,” “consumers either have lost, or will lose, some or all of their investments.” The FTC’s press release also announces the filing of charges against a Belizean bank for allegedly assisting and facilitating the investment scam, as well as contempt motions against several of the individual defendants. The FTC is seeking information from affected consumers.
On October 16, the FTC announced that it reached a settlement with a Texas-based company over allegations that it violated the FCRA by failing to take reasonable steps to ensure the accuracy of tenant-screening information furnished to landlords and property managers. The FTC alleges that the company compiled screening reports through an automated system using broad criteria that incorrectly matched applicants to criminal records. Additionally, the company allegedly lacked policies or procedures to assess the accuracy of those results, which led to some renters being turned down for housing. The settlement requires the company to pay $3 million—the largest civil penalty ever assessed by the FTC against a background screening company. In addition, the company must maintain reasonable procedures to ensure consumer reports contain the maximum possible accuracy of information and is subject to compliance, recordkeeping, and reporting requirements.
On October 16, the FTC announced the launch of a new interactive online format that will release aggregated consumer complaint data on a quarterly basis. The interactive dashboards explore aggregated statistics about fraud, identity theft, and other consumer protection problems, and also provide a state-by-state breakdown of issues. As part of the new initiative, the FTC’s Consumer Protection Data Spotlight focuses on the rise in consumer complaints concerning gift card scams, which are now the most reported method of payment for imposter scams. According to the FTC, fraud report payments using gift and reload cards experienced a 270 percent increase (from 7 percent up to 26 percent), which can be attributed to quick access to cash, largely irreversible transactions, and anonymity. As of September 2018, the FTC reports that reported losses involving the use of gift and reload cards has already reached $53 million.
CFPB announces settlement with companies that allegedly delayed transfer of consumer payments to debt buyers
On October 4, the CFPB announced a settlement with a group of Minnesota-based companies that allegedly violated the Consumer Financial Protection Act when consumers made payments on debts that the companies had already sold to third parties, and the companies improperly delayed the forwarding of some of those payments to debt buyers. According to the consent order, the companies—whose practices include the purchasing, servicing, collection, and furnishing consumer-report information on consumer loans—partnered with third-party banks to sell merchandise on closed-end or open-end revolving credit. Within a few days, banks originated the loans and sold the receivables to the companies. The companies subsequently serviced the debts and sold the receivables to a third party. For defaulted accounts, the companies charged off the accounts and sold them to third-party debt buyers. According to the Bureau, the companies allegedly failed to notify consumers when their accounts were sold, failed to inform them who now owned the debt, and continued to accept direct pays from consumers. The Bureau contends that between 2013 and 2016, the companies delayed forwarding direct pays for more than 31 days in 18,000 instances, and in 3,500 of those instances, the companies did not forward the payments for more than a year. Moreover, the Bureau asserts that these delays led to misleading collection efforts, including collection activity on accounts consumers had completely paid off. The order requires the companies to pay a civil money penalty of $200,000, and improve their policies and procedures to prevent further violations.
On September 28, as part of Operation Game of Loans, a coordinated effort between the FTC and state law enforcement, the FTC announced settlements with several individuals and their associated companies (defendants), accused of violating the FTC Act and the Telemarketing Sales Rule when marketing and selling student debt relief services. According to the FTC, the defendants, among other claims: allegedly (i) misrepresented to consumers that they were affiliated with the Department of Education or a borrower’s loan servicer; (ii) claimed that consumers who paid an up-front fee—as much as $1,000 according to the FTC’s complaint—would qualify for or be approved to receive permanently reduced monthly payments or have their student loans forgiven or discharged; and (iii) engaged in deceptive advertising practices through social media, falsely claiming they could qualify, establish eligibility for, approve, or enroll consumers in loan forgiveness programs.
Under the terms of the settlements, the defendants are permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief products or services—or from assisting others to do the same. The defendants also are prohibited from making misrepresentations related to financial products and services. Combined, the settlements total more than $19 million in monetary judgments, all of which have been partially suspended due to the defendants’ inability to pay the entire amount of their respective judgments. The more than $5 million in unsuspended amounts may be used for equitable relief, including consumer redress.
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Benjamin W. Hutten to discuss "BSA program reporting, management and board of directors responsibilities" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- H Joshua Kotin to discuss "Recent developments in fair lending and avoiding the pitfalls" at the Arkansas Community Bankers/Bankers Assurance 2019 Compliance Conference
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at the American Bar Association Business Law Section Annual Meeting
- Valerie L. Hletko to discuss "Banking on guns ‘n drugs: Social policy meets financial services" at the American Bar Association Business Law Section Annual Meeting
- Daniel P. Stipano to discuss "Navigating the conflicting federal and state laws for doing business with cannabis companies" at the American Bar Association Business Law Section Annual Meeting
- Tim Lange to discuss "Services and value" at the North American Collection Agency Regulatory Association Annual Conference
- Katherine L. Halliday to discuss "UDAP, UDAAP & the Map rule compliance basics" at the Mortgage Bankers Association Regulatory Compliance Conference
- Brandy A. Hood to discuss "How to ace your TRID exam" at the Mortgage Bankers Association Regulatory Compliance Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Melissa Klimkiewicz to discuss "Navigating FHA rules and regs" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jeffrey P. Naimon to discuss "Washington regulatory overview" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Kathryn L. Ryan to discuss "The state’s role in fintech: Providing an industry framework for innovation" at Lend360
- Jeffrey P. Naimon to discuss "Truth in lending" at the American Bar Association National Institute on Consumer Financial Services Basics
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions" at the Institute of International Bankers Risk Management and Regulatory Examination/Compliance Seminar
- Jonice Gray Tucker to discuss "Fintech regulatory developments, crypto-assets, blockchain and digital banking, and consumer issues" at the Practising Law Institute Banking Law Institute
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference