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FTC settles with VoIP service provider for TSR violations
On April 26, the FTC announced the filing of a proposed consent order with a Voice over Internet Protocol (VoIP) service provider, a related company, and the company’s owner (collectively, “defendants”) for allegedly “help[ing] scammers blast millions of illegal robocalls.” In the complaint the FTC claims that the defendants violated Section 5(a) of the FTC Act, the Telemarketing Act, and the TSR by continuing to provide VoIP services to customers despite “knowing or consciously avoiding knowing” the customers were: (i) using the services to place calls to numbers on the FTC’s Do Not Call (DNC) Registry; (ii) delivering prerecorded messages; and (iii) displaying spoofed caller ID services to callers involved in scams related to credit card interest rate reduction, tech support, and the Covid-19 pandemic.
According to the announcement, this is the third such action by the FTC against VoIP service providers during the past two years. Under the terms of the consent order, the defendants are (i) banned from assisting and facilitating abusive telemarketing practices, including the use of VoIP services; (ii) prohibited from further violations of the TSR or assisting others in doing so; (iii) banned from providing services or assigning telephone numbers without employing automated procedures to block calls from unassigned or invalid numbers; and (iv) required to ensure that they do not provide VoIP to suspected telemarketers. The proposed order also provides for a $3 million civil money penalty that is suspended due the company’s inability to pay.
CFPB invokes dormant authority to examine nonbanks
On April 25, the CFPB announced it was invoking a “dormant authority” under the Dodd-Frank Act to conduct supervisory examinations of fintech firms and other nonbank financial services providers based upon a determination of risk. “This authority gives us critical agility to move as quickly as the market, allowing us to conduct examinations of financial companies posing risks to consumers and stop harm before it spreads,” CFPB Director Rohit Chopra explained. The Bureau has direct supervisory authority over banks and credit unions with more than $10 billion in assets, certain nonbanks regardless of size that offer or provide consumer financial products or services, and the service providers for such entities. With this announcement, the Bureau now plans to use a provision under Section 1024 of Dodd-Frank that allows it to examine nonbank financial entities, upon notice and an opportunity to respond, if it has “reasonable cause” to determine that consumer harm is possible.
In tandem with the announcement, the Bureau also issued a request for public comment on an updated version of a procedural rule that implements its statutory authority to supervise nonbanks “whose activities the CFPB has reasonable cause to determine pose risks to consumers,” including potentially unfair, deceptive, or abusive acts or practices. The statute requires that the Bureau “base such reasonable cause determinations on complaints collected by the CFPB, or on information from other sources,” which the Bureau stated may include “judicial opinions and administrative decisions, . . . whistleblower complaints, state partners, federal partners, or news reports.” “Given the rapid growth of consumer offerings by nonbanks, the CFPB is now utilizing a dormant authority to hold nonbanks to the same standards that banks are held to,” Chopra stated.
Among other things, the new rule establishes a disclosure mechanism intended to increase transparency of the Bureau’s risk-determination process. Specifically, the new rule will exempt final decisions and orders by the CFPB director from being considered confidential supervisory information, allowing the Bureau to publish the decisions on their website. Subject companies will be given an opportunity seven days after a final decision is issued to provide input on what information, if any, should be publicly released. According to the Bureau, there “is a public interest in transparency when it comes to these potentially significant rulings by the Director as head of the agency. Also, if a decision or order is publicly released, it would be available as a precedent in future proceedings.”
The procedural rule is effective upon publication in the Federal Register and has a 30-day comment period.
OCC launches consumer financial health discussion series
On April 22, the OCC announced an upcoming quarterly discussion series focusing on consumer financial wellbeing. The first event in the Financial Health: Vital Signs series will occur on April 28 and focus on minority ownership of cryptocurrency. Future events will feature discussions with acting OCC Comptroller Michael J. Hsu and other academic, community, and industry leaders. The discussion series will be livestreamed and open to the public.
OCC launches Milwaukee REACh
On April 20, the OCC announced the launch of Milwaukee REACh , which expands the OCC’s Project REACh (Roundtable for Economic Access and Change) efforts to Milwaukee, Wisconsin. As previously covered by InfoBytes, in 2020, the OCC launched this initiative to promote greater financial inclusion of underserved populations. According to the OCC, Project REACh brings together leaders from the banking industry, national civil rights organizations, and various businesses and technology organizations who will identify and reduce barriers to accessing capital and credit. Noting that “Milwaukee's residents face socioeconomic challenges including limited access to credit and capital and a lack of opportunity for affordable home ownership,” acting Comptroller Michael J. Hsu stated that Milwaukee REACh “will help address that and other barriers to financial inclusion.”
FTC charges funeral company with deceptive marketing practices
On April 22, the DOJ filed a complaint on behalf of the FTC against certain defendants providing funeral goods and services to consumers throughout the U.S. for alleged violations of Section 5 of the FTC Act and the FTC’s Funeral Rule. (See also FTC press release here.) According to the complaint, the defendants, who arrange third-party cremation services, allegedly (i) misrepresented that they perform local funeral services, which were instead outsourced to unaffiliated third parties; (ii) charged consumers additional undisclosed costs; and (iii) illegally threatened to withhold remains or information about the remains from consumers who refused to pay previously undisclosed fees or the new, higher prices. The complaint seeks injunctive relief, monetary relief, and civil penalties.
HUD announces Massachusetts disaster relief
On April 20, HUD announced disaster assistance for certain areas in Massachusetts impacted by a severe winter storm from January 28 to January 29. The disaster assistance follows President Biden’s major disaster declarations on April 18. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties effective April 18 and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program enables individuals who have lost homes to finance a home purchase or to refinance a home to include repair costs through a single mortgage. The program also allows homeowners with damaged property to finance the repair of their existing single-family homes. Furthermore, HUD is allowing administrative flexibilities to community planning and development grantees, as well as to public housing agencies and Tribes.
CFPB, New York sue remittance provider
On April 21, the CFPB and New York attorney general filed a complaint against a remittance provider (defendant) for allegedly violating the Electronic Funds Transfer Act and its implementing Regulation E and the Remittance Rule (the Rule) and the Consumer Financial Protection Act (CFPA), among various consumer financial protection laws. The Bureau’s announcement called the defendant a “repeat offender” citing that in 2018, the FTC filed a motion for compensatory relief and modified order for permanent injunction against the defendant, which alleged that it failed to adopt and implement a comprehensive fraud prevention program mandated by the 2009 order (covered by InfoBytes here). The CFPB complaint alleges that from October 2018 through 2022, the defendant: (i) violated the Remittance Rule requirements by repeatedly failing “to provide fund availability dates that were accurate, when the Rule required such accuracy”; (ii) “repeatedly ignored the Rule’s error-resolution requirements when addressing notices of error from consumers in New York, including in this district, and elsewhere;” and (iii) failed to establish policies and procedures designed to ensure compliance with money-transferring laws, in violation of Regulation E. The complaint further noted that the defendant’s “own assessments of consumers’ complaints showed that the dates Defendants disclosed to consumers, repeatedly, were wrong,” and that the defendant “found multiple delays in making funds available to designated recipients, including delays that constituted errors under the Rule,” among other things. Finally, the Bureau claims that the defendant violated the CFPA “by failing to make remittance transfers timely available to designated recipients or to make refunds timely available to senders.” The Bureau’s complaint seeks consumer restitution, disgorgement, injunctive relief, and civil money penalties. According to a statement released by CFPB Director Rohit Chopra, "the remittance market is ripe for reinvention, and the CFPB will be examining ways to increase competition and innovation for the benefit of both families and honest businesses, while also avoiding creating a new set of harms."
CFPB releases medical debt report
On April 20, the CFPB released a report analyzing complaints submitted to the Bureau in 2021 regarding medical billing, collection, and consumer reporting practices. The report describes the difficulties that consumers face in identifying, verifying, or eliminating the debt. The report also noted that most of the complaints could be sorted into two main themes: (1) the debt was already paid, does not belong to the consumer in question, or is otherwise incorrect, and (2) that information included in collection notices raised concerns. According to the Bureau, key findings of the report include, among other things: (i) from 2018 to 2021, complaints regarding collection attempts on medical bills that were not owed increased by 31 percent; (ii) approximately 15 percent of debt collection complaints in 2021 were about attempts to collect a medical bill; and (iii) “consumers often expressed surprise and frustration about finding out about old or small medical debts when checking their credit report.” The report is the most recent among statements and reports from the CFPB regarding medical debts and credit reporting. As previously covered by InfoBytes, in March the CFPB released a report, Medical Debt Burden in the United States, that cited research finding that $88 billion in medical debt on consumer credit reports, accounting for 58 percent of all uncollected debt tradelines reported to credit reporting agencies.
HUD announces $15,000 payment for FHA violations
On April 19, HUD announced a conciliation agreement with a national bank and one if its loan officers to resolve allegations that respondents violated the Fair Housing Act (FHA) by denying a mortgage loan to a couple until after one of the applicants returned to work from maternity leave. Under the FHA, it is unlawful to discriminate in the terms, conditions, or privileges associated with the sale of a dwelling on the basis of race, color, national origin, religion, sex, disability, or familial status, including denying a mortgage loan because an applicant is on maternity leave. In addition to requiring a $15,000 payment be made to the couple, the bank must “adhere to a policy wherein applicants on temporary leave, including parental leave, can be approved for a mortgage prior to returning to active work status,” and provide fair lending training to employees. The conciliation agreement does not constitute an admission by respondents or evidence of a finding by HUD of a violation of the FHA.
FTC takes action against day-trading company for deceptive sales techniques
On April 19, the FTC filed a complaint against a day-trading investment company and its CEO alleging the defendants violated the FTC Act and the Telemarketing Sales Rule (TSR) in connection with the company’s investment opportunities. According to the complaint, the Massachusetts-based defendants promote day-trading investments online and sell programs promising to show consumers how to earn substantial profits in a short time period. The FTC contends that the defendants promote these so-called “profitable” and “scalable” trading strategies to consumers through allegedly deceptive sales pitches and inform consumers that their strategies are effective even with initial investments as small as $500. However, the FTC claims that 74 percent of customers’ accounts actually lost money and that only 10 percent of the accounts earned more than $90.
Under the terms of the proposed stipulated order, the defendants are required to pay $3 million in consumer redress and are permanently restrained and enjoined from making unsubstantiated earnings claims concerning consumers’ potential to earn money using their trading strategies regardless of the amount of capital invested or the amount of time spent trading. Defendants are also prohibited from violating federal law, or from making any misrepresentations about investment opportunities, including misrepresentations in connection with telemarketing regarding the amount of “risk, liquidity, earnings potential, or profitability of goods or services that are the subject of a sales offer.”