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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.
CFPB studies geographic patterns in credit invisibility
On September 19, the CFPB released a new Data Point report from the Office of Research titled, “The Geography of Credit Invisibility,” which examines geographic patterns in the prevalence of “credit invisible” consumers, a term for those who do not have a credit record maintained by a national credit reporting agency, or have a credit record that is deemed to have too little or too old of information to be treated as “scorable” by widely used credit scoring models. The report studies whether the geographic location of a consumer’s residence is correlated with the likelihood of remaining credit invisible and aims to “aid policymakers and advance the conversation around potential causes and solutions.” Among other things, the report found:
- credit invisibility may be higher for geographic tracts near universities due to their concentration of adults under 25 who may not have established a credit record yet;
- rural areas have the most credit invisibility per capita;
- consumers are less likely to use a credit card as an entry product to establishing a credit record in rural and low-to-moderate income areas;
- credit invisibility was more prevalent in areas with less internet access as many products are originated through online services; and
- there is little relationship between distance to the nearest bank branch and the occurrence of credit invisibility.
The CFPB previously published two other Data Point reports on the subject: “Credit Invisibles” in 2015 and “Becoming Credit Visible” in 2017.
DOJ settles with apartment owner for alleged SCRA violations
On September 11, the Department of Justice announced a settlement with a Nebraska apartment complex owner resolving allegations that it violated the Servicemembers Civil Relief Act (SCRA) by unlawfully charging lease termination fees for 65 servicemembers. The complaint, which was filed on the same day as the settlement, alleges that between January 2012 and June 2017, the apartment complex owner imposed early lease termination fees, ranging from $78 to almost $1,500, on servicemembers who sought termination due to qualifying military orders under the SCRA. The settlement requires the apartment complex owner, among other things, to (i) pay more than $76,000 in damages to the 65 identified servicemembers; (ii) pay a $20,000 civil money penalty, and (iii) develop policies and procedures related to SCRA lease terminations.
CFPB publishes quarterly consumer credit trends on telecommunications-debt collection reporting
On August 22, the CFPB released the latest quarterly consumer credit trends report, which focuses on the reporting of telecommunications-debt collections to nationwide consumer reporting agencies based on a sample of approximately 5 million credit records. The report notes that during the past five years approximately 22 percent of credit records contained at least one telecommunications-related (telecom-related) item, with nearly 95 percent of these telecom-related items being reported by collection agencies. The report highlights that 37 percent of consumers who reported having been contacted about a debt in collection in the prior year were contacted about a telecommunications debt, and more than one fifth of all debt collection revenue is telecom-related debt. The report also observed that a single telecom collection may be associated with multiple tradelines in a credit record over time, suggesting that telecom collections are often reassigned. Notably, however, the report suggests that while the presence of a telecom-related collection item on a credit record is most commonly associated with consumers with lower credit scores, the change in score before and after the collection item appears on the credit record is often small, and as a result, a single telecom-related collection is unlikely to affect a credit decision for those consumers.
FDIC releases 25th anniversary edition of FDIC Consumer News
On August 3, the FDIC published a special edition of its quarterly FDIC Consumer News publication, recognizing the 25th anniversary of the newsletter, titled “25 Years of Tips You Can Bank On: Time-Tested Strategies for Managing and Protecting Your Money.” The quarterly newsletter intends to deliver “timely, reliable and innovative tips and information” about financial matters to consumers. The special edition reprises and updates an old article from each year going back to 1993 and includes topics such as (i) retirement planning and saving; (ii) how to know what is FDIC insured; (iii) minimizing the risk of identity theft; (iv) refinancing loans; and (v) cybersecurity checklists.
FTC halts fraudulent telemarketing scheme in Arizona
On July 31, the FTC announced that it had successfully halted a $3 million telemarketing scheme, which falsely promised to obtain grants for consumers in exchange for the upfront payment of fees. The FTC alleges the Arizona-based defendants charged consumers upfront fees ranging from $295 to $4,995 and promised to obtain $10,000 or more in government, corporate, or private grants that could help the consumers pay off personal expenses such as medical bills. However, “most, if not all,” consumers ultimately received nothing in return and the defendants often changed the company name once they received consumer complaints or state attorney general notices, or once they lost merchant accounts.
On July 16, the FTC filed a now-unsealed complaint with the U.S. District Court for the District of Arizona. The FTC simultaneously sought a temporary restraining order (TRO), which the court granted the following day. Among other things, the TRO prohibits the defendants from: (i) conducting similar business activities; (ii) violating the Telemarketing Sales Rule; and (iii) using or disseminating consumer information obtained through the fraudulent activities. Additionally, the TRO freezes the defendants’ assets and places the companies in receivership until relief is determined.
CFPB announces settlement with Alabama-based operation for allegedly failing to properly disclose finance charges
On July 19, the CFPB announced a settlement with a small-dollar lending operation that allegedly failed to properly disclose finance charges and annual percentage rates associated with auto title loans in violation of the Truth in Lending Act (TILA) and the prohibition on deceptive practices in the Consumer Financial Protection Act (CFPA). According to the consent order, the Alabama-based operation, which owned and operated approximately 100 retail lending outlets in Alabama, Mississippi, and South Carolina under several names, materially misrepresented the finance charges consumers would incur for Mississippi auto title loans by disclosing a finance charge based on a 30-day term while having consumers sign a 10-month payment schedule. The Bureau asserts that “[c]onsumers acting reasonably likely would not understand that the finance charge disclosed in the loan agreement does not actually correspond to their loan payment term.” Furthermore, the Bureau contends that the operation also failed to disclose the annual percentage rate on in-store advertisements as required under TILA. The order requires the operation to pay redress in the amount of $1,522,298, which represents the total undisclosed finance charges made directly or indirectly by affected consumers on their loans. However, based on defendants’ inability to pay this amount, full payment is suspended subject to the operation’s paying $500,000 to affected consumers. In addition to the penalties, the operation is prohibited from continuing the illegal behavior and the operation’s board must ensure full compliance with the consent order.
CFPB settles with Kansas-based company and part-owner for debt collection violations
On July 13, the CFPB announced a settlement with a Kansas-based company and its former CEO and part-owner for using a network of debt collection agencies (the Agencies) that allegedly engaged in improper debt collection tactics in violation of the prohibitions in the Consumer Financial Protection Act (CFPA) on engaging in unfair, deceptive, or abusive acts or practices (UDAAPs) and on providing substantial assistance to others engaging in such practices. The Bureau also alleged that the company, acting through the Agencies, violated the Fair Debt Collection Practices Act (FDCPA). According to the consent order, the Kansas-based company and its part-owner had “knowledge or a reckless disregard” of the illegal debt collection tactics used by the Agencies, including misrepresenting the amount the consumer actually owed and falsely threatening consumers and their families with lawsuits. In its findings and conclusions, the CFPB alleges that, after reviewing the Agencies’ practices, the company’s “compliance personnel recommended terminating the Agencies because of the Agencies’ illegal collection acts and practices, but [the company and its part-owner] continued placing accounts with the Agencies” and selling debts to one of the Agencies. In addition, the Bureau alleges the company and its part-owner provided operational assistance to the Agencies, such as (i) drafting and implementing policies and procedures that falsely implied compliance with federal laws; (ii) defending the Agencies’ practices when original creditors raised concerns about collection tactics; and (iii) preventing compliance personnel from conducting effective reviews of the Agencies. The order imposes a civil money penalty judgment of $3 million against the Kansas-based company and $3 million against the part-owner but the full payment is suspended subject to the company paying a $500,000 penalty and the part-owner paying a $300,000 penalty. In addition to the penalties, the company is prohibited from continuing the illegal behavior and must create and submit to the Bureau a comprehensive compliance plan, while the part-owner is permanently restrained from acting as an officer, director, employee, agent or advisor of, or otherwise providing management, advice, direction or consultation to, any individual or business that collects, buys, or sells consumer debt.
FTC and New York Attorney General announce action against phantom debt operation
On June 27, the FTC and the New York Attorney General’s Office announced charges against two New York-based phantom debt operations and their principals. The complaint alleges they ran a deceptive and abusive debt collection scheme involving the marketing and selling of fictitious loan debt portfolios and collecting on debts consumers did not owe. The charges brought against the operations allege violations of the FTC Act, the Fair Debt Collection Practices Act, and New York state law. According to the complaint, the debt broker knowingly purchased fabricated debt from a phantom debt collection operation previously charged by the FTC and the Illinois Attorney General in a separate action for selling fabricated debt. (As previously covered by InfoBytes, the Illinois-based operation was banned from the debt collection business and prohibited from selling debt portfolios.) The debt broker then engaged a debt collection agency and its owner to collect on the fabricated debt using illegal collection tactics, while continuing to purchase debts and place them for collection despite having knowledge that consumers disputed the debts. The complaint seeks, among other things, injunctive relief, restitution, and disgorgement.
FTC settles with North Carolina-based debt collection business and its principals
On June 4, the FTC announced settlements with a North Carolina-based debt collection business and its principals resolving allegations that the business violated the FTC Act and the Fair Debt Collection Practices Act (FDCPA) by making false, unsubstantiated, or misleading representations regarding debt owed on payday loans or other debts and threatening legal action. As previously covered in InfoBytes, the business allegedly used a variety of “trade names” that sound like law firms to threaten individuals if they failed to pay debt they did not actually owe or that the defendants had no right to collect. The terms of the settlement call for a $2.7 million judgment against the business and one of the principals, as well as a $1.8 million judgment against the remaining principal, with all parties jointly and severally liable for approximately $1.6 million. The judgments will be partially suspended after defendants surrender certain assets. The settlements also prohibit all defendants from debt collection activities as well as from buying or selling debt in the future.