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FTC Seeks Order to Stop Alleged Telemarketing Debt Relief Scam
On December 4, the FTC announced that it charged two debt relief companies and five individuals with violations of the FTC Act and the Telemarketing Sales Rule (TSR) in connection with their sale of “bogus” credit card interest rate reduction services. According to the complaint, the defendants contacted consumers using illegal robocalls and made false guarantees to “substantially and permanently” lower the consumers’ credit card interest rates and/or save the consumer thousands of dollars in interest payments. However, the scheme rarely obtained the promised results. In some instances where consumers did get lower interest rates, those rates were only temporary “teaser” rates that did not result in a permanent rate reduction. In addition, defendants failed to disclose the associated balance transfer fees that accompanied the lower teaser rates. The FTC also charged the defendants with TSR violations for (i) collecting illegal upfront fees; (ii) making illegal robocalls; (iii) contacting consumers on the National Do Not Call Registry; and (iv) not paying the required fees to the Registry. The FTC charged one additional individual defendant with substantially assisting the two debt relief operations with the allegedly illegal conduct. The FTC is seeking a temporary restraining order (TRO) against the defendants, requesting the appointment of a receiver to control the two corporate entities, and an asset freeze to assist in potential consumer redress.
Fed Fines Kansas State Bank for Alleged Deceptive Mortgage Acts
On November 28, the Federal Reserve Board (Fed) announced it had entered into a consent order with a Kansas state bank over allegations that the bank engaged in deceptive mortgage origination practices in violation of the FTC Act. Specifically, the order alleges that the bank told borrowers that they were paying for discount points that would lower their interest rate, but did not in fact provide those borrowers an interest rate reflective of the price paid for the discount points or, in some cases, a reduced rate at all. The Fed’s order requires the bank to pay restitution to the affected borrowers, but did not impose a further civil money penalty. The bank has decided to terminate all operations of its national mortgage business by year-end 2017.
CFPB Releases Report on Consumers’ Overdraft Experiences
On November 21, the CFPB released a report summarizing findings from a qualitative study about consumers’ experiences with overdraft programs. The study consisted of one-on-one interviews by telephone with 88 individual consumers from May 2014 through June 2014 (the report does not comment on the three-year gap between the interviews and the release). According to the CFPB, the study was not designed to identify systematic trends but instead to provide an in-depth review of consumers’ experiences. The report concluded that consumers need a wide range of educational resources to support the varying experiences and perceptions they have with overdraft services. For example, the report notes that while some consumers commented on unexpected overdraft fees after miscalculating the timing of transaction processing, others noted their intentional use of overdraft options to make purchases or pay bills. The CFPB encouraged financial educators to develop their own overdraft resources with the awareness that consumers may use and interpret programs in varying ways and provided a list of CFPB resources available for use.
CFPB Reports on Financial Institution Outreach to Limited English Proficient Consumers
On November 22, the CFPB released a report focusing on ways financial institutions can expand and improve services to Limited English Proficient consumers (LEP consumers) who often face challenges related to language access and financial literacy. According to findings in the report, LEP consumers often have trouble accessing and interpreting financial products and services, as well as difficulty completing financial documents, managing bank accounts, resolving problems, and accessing financial education. The Bureau’s report—which is compiled from information gathered in interviews with financial institutions, trade associations, nonprofit advocacy groups, and federal agencies, as well as secondary research—presents five common approaches used in the industry to address issues facing LEP consumers: (i) assessing the language needs of consumers; (ii) offering centralized technical support for translation and interpretation initiatives; (iii) developing systems to ensure accuracy of translations and interpretations; (iv) providing training for staff and contractors to ensure language and cultural competencies; and (v) offering platforms to interact with LEP consumers.
The report follows the November 16 release of the CFPB’s final version of its Language Access Plan designed to continue efforts to provide non-English speaking persons access to its own programs and services, including offering translated consumer-facing brochures and handling complaints from consumers in multiple languages. (See previous InfoBytes coverage here.)
CFPB Publishes Notices and Requests for Comment Concerning Collection of Consumer Complaints
On November 28, the CFPB published two notices of its intention to obtain OMB approval to continue its existing consumer complaint collection activities using its “Consumer Response Intake Form” and “Generic Information Collection Plan for Consumer Complaint and Information Collection System (Testing and Feedback).” According to the CFPB, use of the forms allows for electronic complaint submission on the Bureau’s website and streamlines the complaint process for consumers. Comments on the agency’s notices (CFPB-2017-0035 and CFPB-2017-0036) must be received by December 28, 2017.
CFPB Fines Loan-Servicing Software Company $1.1 Million for Flaws Leading to the Reporting of Inaccurate Consumer Information
On November 17, the CFPB ordered a loan-servicing software company to pay a $1.1 million penalty for errors that resulted in the company furnishing incorrect consumer information related to over one million borrowers to the credit reporting agencies. The consent order alleges that the company violated the Consumer Financial Protection Act when its third-party software application generated and furnished inaccurate and incomplete information to consumer reporting agencies because of known software defects. The company allegedly did not share the existence of the defects with its auto-lender clients. In addition to the civil money penalty, the company was ordered to: (i) explain its errors to its clients; (ii) fix the faulty software; and (iii) provide the Bureau with a compliance plan outlining how it plans to identify and fix the defects, as well as ensure that the software is capable of reporting accurate information.
CFPB Initiates Complaint Against Company for Deceptive, Unfair, and Abusive Loan Collection Practices
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.
CFPB Publishes Two RFIs Concerning Free Access to Credit Scores
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.
DOJ Sues Washington State Company for Alleged SCRA Violations
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.
FTC Files Complaint Against Debt Collection Business for Alleged Violations of FTC Act, FDCPA
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.