InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Virginia AG Announces Settlement With Internet Lender Over Licensing Claims and Excessive Interest
On October 25, Virginia Attorney General Mark R. Herring announced a settlement with a Nevada-based internet lender to resolve allegations that the lender violated the Virginia Consumer Protection Act by misrepresenting it was licensed by the state’s Bureau of Financial Institutions and collecting interest exceeding the state’s general usury limit. According to a press release issued by the Attorney General’s office, the settlement requires the lender to provide refunds and interest forgiveness of more than $265,000 to borrowers, and pay the state $50,000 in civil money penalties, costs, and fees. A permanent injunction also prohibits the lender from, among other things, misrepresenting its licensing status and collecting interest exceeding the amount allowed by the state’s general usury statute.
State Attorneys General Announce $220 Million Settlement With German Bank for Allegedly Artificially Manipulating LIBOR Interest Rates
On October 25, New York Attorney General Eric T. Schneiderman announced, in coordination with 44 other state attorneys general, a $220 million settlement with a German bank (bank) to resolve allegations that the bank manipulated the U.S. Dollar London InterBank Offered Rate (LIBOR) and other benchmark interest rates and defrauded government and non-profit entities across the nation. The settlement is the second related to alleged LIBOR manipulations brought by state attorneys general, and is more than twice the amount announced last year with a London-based financial institution and related international investment bank. (See previous InfoBytes summary here.) According to AG Schneiderman, the multi-state investigation revealed that from 2005 to 2010, the bank failed to disclose to “affected governmental and not-for-profit counterparties” that (i) it had made false LIBOR submissions inflating borrowing costs linked to the London and U.S. dollar interbank offered rates; (ii) bank traders tried to influence other banks’ LIBOR submitters to make rate alterations in order to benefit their own trading positions; and (iii) the bank was cognizant of the fact that other banks manipulated LIBOR submissions and that “LIBOR was a false rate.” Under the terms of the settlement, affected entities will be eligible to receive a portion of the settlement fund, with the remainder to be used for investigation expenses and other purposes.
OCC Announces Recent Enforcement Actions and Terminations
On October 19, the OCC released a list of new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such parties. The OCC also released a list of recently terminated enforcement actions. The new enforcement actions include cease and desist orders, civil money penalty orders, personal cease and desist orders, removal/prohibition orders, and notices. The personal cease and desist orders relate to four directors of a Texas bank that were each fined $5,000 for breaches of fiduciary duty and unsafe or unsound practices. These practices allegedly included approving and ratifying loans with “concessionary and liberal terms to unqualified borrowers” in order to “finance the borrower’s purchase of stock in the [b]ank’s holding company to raise capital for the Bank.” (See civil money penalties here, here, here, and here.)
European Commission Releases First Annual E.U.-U.S. Privacy Shield Review; Framework Works Well With Room for Improvement
On October 18, the European Commission (Commission) released its first annual review of the E.U.-U.S. Privacy Shield (Privacy Shield) framework for transatlantic data transfers, citing the Privacy Shield “ensures an adequate level of protection for personal data,” but “there is some room for improving its implementation.” In the report, the Commission’s findings and conclusions cover topics including: (i) redress options for EU individuals; (ii) complaint handling and enforcement procedures to “safeguard individual rights”; (iii) cooperation with European Data protection authorities; and (iv) the process for certifying companies under the Privacy Shield. However, the report also makes recommendations for improvement, such as (i) increasing U.S. oversight into whether U.S. companies are complying with the Privacy Shield’s requirements to protect European’s personal data; (ii) conducting regular reviews to ensure companies are not making false claims about their participation in the Privacy Shield; and (iii) establishing a closer means of communication between “privacy enforcers” to develop guidance.
Acting FTC Chairman Maureen K. Ohlhausen commented on the Commission’s review: “Enforcing international privacy frameworks such as Privacy Shield is an integral part of our Privacy and Data Security program, as highlighted in three recently announced Privacy Shield enforcement actions. We look forward to continuing to work with our European counterparts to ensure that the Privacy Shield remains a robust mechanism for protecting privacy and enabling transatlantic data flows.” (See InfoBytes coverage of the three FTC enforcement actions here, and refer here for previous InfoBytes coverage of the Privacy Shield.)
FTC Obtains Default Judgment Against Operations That Allegedly Sold Counterfeit Payday Loan Debt Portfolios
On October 17, the FTC issued a press release announcing a default judgment in an action brought against two Kansas-based operations and their owner (defendants), who allegedly violated the Federal Trade Commission Act by selling lists of counterfeit payday loan debt portfolios to debt collectors. The allegations claimed that in numerous instances, the portfolios listed “loans that the identified lenders have not, in fact, made to the identified consumers,” and that the defendants “have not purchased, or otherwise obtained, any rights to collect loan debts originated by the lenders listed . . ., nor have they engaged in any transaction that authorizes them to collect, sell, distribute, or transfer any valid loans originated by those lenders.” As a result, numerous consumers were contacted by various debt collectors demanding repayment of the fake debts, and in some instances, consumers made payments to either stop the collection calls or because they feared becoming delinquent. Under the terms of the default judgment, the defendants (i) must pay more than $4.1 million as equitable monetary relief; (ii) are banned from handling sensitive financial information, such as “bank account numbers, credit or debit card numbers, or social security numbers”; and (iii) are prohibited from misrepresenting material facts.
FTC, State AGs Announce Nationwide Crackdown Against Student Loan Debt Relief Scams
On October 13, in partnership with 11 states and the District of Columbia, the FTC announced a federal-state law enforcement initiative to combat deceptive student loan debt relief scams. According to the FTC, “Operation Game of Loans” targets companies that engage in practices that harm student loan borrowers, such as allegedly (i) charging illegal upfront fees; (ii) making false or misleading statements promising, among other things, debt relief, loan forgiveness, reduced interest rates, and credit repair services; (iii) pretending to be affiliated with the government or loan servicers; (iv) engaging in deceptive marketing practices; (v) pocketing consumer fees rather than applying the money towards student loan balances; and (vi) charging consumers for document preparation services that are readily available to consumers for free. According to a press release issued by the FTC, the initiative “encompasses 36 actions by the FTC and state attorneys general against scammers alleged to have used deception and false promises of relief to take more than $95 million in illegal upfront fees from American consumers over a number of years.”
That same day, as part of “Operation Game of Loans,” Attorney General Lisa Madigan announced a lawsuit against a pair of entities (defendants) accused of allegedly violating Illinois law by charging upfront fees for services guaranteed to “lower monthly student loan payments, improve credit scores, get students out of default, and negotiate tax and student loan debt adjustments.” The complaint further alleges that not only do the defendants lack the ability to provide the advertised services, they also allegedly impersonate students to gain access to students’ Federal Student Aid IDs (the federal government prohibits entities from accessing federal student aid websites even if authorized by the borrower), and fail to refund consumers—as promised—if they fail to provide debt relief. The complaint seeks injunctive relief, restitution, and civil penalties.
New York AG, Auto Dealers Reach Settlement Over Advance Fee Allegations That Triggered Inflated Vehicle Prices
On October 12, New York Attorney General Eric T. Schneiderman announced separate settlements (here and here) with two auto dealer groups to resolve allegations that they violated state and federal law by charging upfront fees for “after-sale” credit repair and identity theft protection services, which were provided by a third party, and bundling those fees into vehicle sale or lease prices. According to the settlements, the groups—which have neither admitted nor denied the allegations—are required to pay affected consumers more than $900,000 in restitution and pay a $135,000 fine to the state. The settlements also prohibit the groups from selling or marketing credit repair or identity theft protection services and require that consumers be informed—both orally and in writing—of any other “after-sale” products.
CFPB Takes Action Against Debt Relief Companies for Allegedly Violating the TSR and Claiming to be Affiliated With the Federal Government
On October 12, the CFPB announced the filing of a complaint in the U.S. District Court for the District of Maryland against two companies, their service provider, and their owners (defendants) for allegedly misleading consumers about their debt validation program. According to the complaint, the defendants allegedly engaged in abusive and deceptive acts and practices in violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act by purportedly (i) charging advance fees for debt-relief services before altering the terms of the consumers’ debts or achieving promised results; (ii) misrepresenting the abilities of their debt-relief and credit-repair services; (iii) failing to disclose to consumer that if they stopped making payments on debts enrolled in the service they may be subject to collections or lawsuits from creditors that could increase the overall amount of money owed due to fees and interest; and (iv) misrepresenting an affiliation, endorsement, or sponsorship with the federal government by using direct mailers designed to look like an official government notice.
DOJ Civil Rights Division Issues Annual Report to Congress
In September, the DOJ Civil Rights Division issued its Annual Report to Congress regarding its 2016 activities related to the Equal Credit Opportunity Act (ECOA), the Fair Housing Act (FHA), and the Servicemembers Civil Relief Act (SCRA). Highlights include:
- Fair lending: The DOJ opened 18 fair lending investigations; filed seven lawsuits and settled six of them; and obtained almost $37 million in relief. At the end of 2016, the DOJ had 33 open fair lending investigations.
- Servicemembers Civil Relief Act: In November 2016, the DOJ announced a new pilot program funding additional attorneys and resources to support enforcement efforts related to the SCRA. In addition, the DOJ entered into two SCRA settlements, initiated a new lawsuit (subsequently settled in 2017), and continued to support distribution of compensation under the National Mortgage Settlement.
- ECOA/FHA Referrals: The DOJ received 22 ECOA and FHA referrals in 2016; opened eight investigations from these referrals; and noted that all but one of the lawsuits filed by the Civil Rights Division in 2016 were based in part on referrals.
FTC to Hold Informational Injury Workshop
On September 29, the FTC announced it will host an “informational injury” workshop on December 12 to examine the types of injuries consumers face when information about them is misused , as well as the tradeoffs when collecting, using, or sharing consumers’ personal information. In preparation for the workshop, the FTC is seeking public input concerning a range of issues such as (i) the types of qualitative consumer injuries resulting from privacy and data security incidents; (ii) the best ways to assess or quantify injury; and (iii) the cost benefit analysis of collecting, using, and sharing information when facing potential injury. The FTC will accept comments through October 27.