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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.
FTC announces settlements with website operators over the sale of fake documents allegedly used for fraud and identity theft
On September 18, the FTC announced three proposed settlements with the operators of websites who allegedly violated the FTC Act’s prohibition against unfair practices by selling fake financial documents used to facilitate identity theft and other frauds, including loan and tax fraud. As previously covered in InfoBytes, identity theft was the second largest category of consumer complaints reported in 2017 according to the FTC. The FTC brought charges against the first defendant, alleging the defendant engaged in the sale of fake pay stubs, bank statements, and profit-and-loss statements, as well as providing a product that allowed customers to edit existing (and authentic) bank statements. The second defendant’s charges include the alleged sale of fake pay stubs, auto insurance cards, and utility and cable bills, while the allegations against the third defendant also include the sale of fake tax forms, bank statements, and verifications of employment. While the defendants’ websites claimed that the fake documents were sold for “‘novelty’ and ‘entertainment’ purposes,” the FTC asserts that the defendants “failed to clearly and prominently mark such documents as being for such purposes and did not state on the documents themselves that they were fake.”
Under the terms of the proposed settlement agreements (see here, here, and here), monetary judgments are imposed against the defendants, who also are permanently prohibited from advertising, marketing, or selling similar fake documents.
- Moorari K. Shah to discuss "State regulatory and disclosures" at the Equipment Leasing and Finance Association Legal Forum
- Daniel P. Stipano to discuss "The state of the BSA 2019: What’s working, what’s not, and how to improve it" at the West Coast Anti Money-Laundering Forum
- Buckley Webcast: The future of the Community Reinvestment Act
- Hank Asbill to discuss "Creative character evidence in criminal and civil trials" at the Litigation Counsel of America Spring Conference & Celebration of Fellows
- Buckley Webcast: Amendments to the CFPB's proposed debt collection
- Brandy A. Hood to discuss "Flood NFIP in the age of extreme weather events" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "UDAAP compliance" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "Major state law developments" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Kathryn L. Ryan to discuss "State examination/enforcement trends" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Benjamin K. Olson to discuss "LO compensation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- APPROVED Webcast: State and SAFE Act licensing requirements for banks
- John C. Redding to discuss "TCPA compliance in the era of mobile" at the Auto Finance Risk Summit
- Buckley Webcast: The next consumer litigation frontier? Assessing the consumer privacy litigation and enforcement landscape in 2019 and beyond
- Buckley Webcast: Data breach litigation and biometric legislation
- Buckley Webcast: Trends in e-discovery technology and case law
- Hank Asbill to discuss "Pay no attention to the man behind the curtain: Addressing prosecutions driven by hidden actors" at the National Association of Criminal Defense Lawyers West Coast White Collar Conference
- Daniel P. Stipano to discuss "Keep off the grass: Mitigating the risks of banking marijuana-related businesses" at the ACAMS AML Risk Management Conference
- Daniel P. Stipano to discuss "Mid-year policy update" at the ACAMS AML Risk Management Conference
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Douglas F. Gansler to discuss "Role of state AGs in consumer protection" at a George Mason University Law & Economics Center symposium