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On June 21, New York AG Eric Schneiderman settled with a New York-based auto dealership to resolve allegations of deceptive sales and advertising practices. Specifically, AG Schneiderman alleged that the company charged consumers up to $5,000 for warranties and service contracts without their authorization and convinced consumers to purchase and finance vehicles on terms they could not afford, falsely promising to refinance the loans on more favorable terms in the subsequent months. In addition, the AG’s office received a number of consumer complaints alleging that the company (i) engaged in various bait and switch tactics, including crediting consumers for less than previously agreed on vehicle trade-ins; (ii) charged consumers a greater price for a vehicle than promised; (iii) charged consumers a higher interest rate on the auto loan than promised; (iv) falsely promised lower yearly mileage limits for lease contracts; and (v) forged consumer signatures on contracts. Pursuant to the settlement agreement, the company must pay restitution ranging from $198 for alleged illegal fee charges to more than $4,000 for unauthorized warranties and services contracts, for a total of more than $101,000 to 119 consumers. The settlement further requires that the company “pay restitution to other consumers who come forward within the next three months and who were subjected to the deceptive and illegal practices uncovered by the investigation, with a cap of $50,000.”
AG’s Schneiderman’s settlement comes after the New York State Police completed a raid and seizure of the company’s business records in May 2012. The company’s finance manager was subsequently arrested for second-degree Scheme to Defraud and third-degree Criminal Possession of a Forged Instrument.
On June 9, the CFPB released an auto loan worksheet designed to help consumers shop for an automobile loan. As part of its Know Before You Owe auto initiative (also known as the Take Control of Your Auto Loan initiative), the online worksheet is intended to help consumers: (i) understand the aggregate amount of the loan – not just the monthly payment – including the interest rate, optional add-ons, and certain fees; (ii) negotiate and compare between loan offers; and (iii) be mindful of how additional financing features, services, or add-ons, such as guaranteed auto protection insurance, extended warranties, and credit insurance, can increase the upfront cost of a loan. In addition to the auto loan worksheet, the CFPB’s Know Before You Owe auto initiative also contains a step-by-step guide designed to help consumers navigate the auto lending process.
The CFPB simultaneously released a report titled “Consumer Voices on Automobile Financing.” The report covers research related to direct and indirect auto financing, but does not address financing offered by “Buy Here Pay Here” dealers or leasing. According to the report, as of April 20, 2016, the CFPB has received more than 2,000 consumer complaint narratives related to vehicle financing issues. The report identifies the following as common themes among consumer complaint narratives: (i) a lack of understanding regarding the potential financing options that are available, or a lack in confidence to explore options different from what was originally offered; (ii) difficulties in understanding and negotiating the loan terms, noting that “consumers reported that they did not fully understand the level of the interest rate they were paying until they started making payments”; (iii) failed promises of receiving refinancing or better loan terms in the future; (iv) challenges related to loans lasting “beyond the life of the vehicle”; (v) problems with add-ons, noting that consumers reported that the add-ons they had purchased “were difficult or impossible to use when needed”; and (vi) issues with credit inquiries and dealers submitting loan applications to lenders without consumer permission. The research and findings outlined in the CFPB’s report was used to develop the Take Control of Your Auto Loan initiative.
On May 24, the CFPB released its latest consumer complaint report. This month’s report highlights complaints related to credit reporting, noting that such complaints made up approximately 143,700 of the 882,800 total complaints that the CFPB has handled as of May 1. The report found, among other things, that: (i) credit reporting remains among the top three products complained about by consumers, with more than 4,500 complaints submitted in April alone; (ii) the three largest U.S. credit reporting companies are also the top three companies offering credit reporting services, accounting for 95% of the credit reporting complaints submitted between December 2015 and February 2016; and (iii) during that same time period, consumers also submitted more than 2,000 complaints involving specialty consumer reporting companies that provide reports in particular areas, including background and employment screening, checking account screening, rental screening, and insurance screening. According to the report, the most common types of credit reporting complaints have included the following: (i) inaccurate information appearing on credit reports, particularly information related to debt collection items and information resulting from identity theft; (ii) difficulty in correcting inaccuracies, including long delays, negative customer service experiences, and failed attempts to have inaccuracies removed; and (iii) the inability to access credit reports online due to overly burdensome identity authentication questions.
On April 26, the CFPB issued its latest installment of reports covering consumer complaints. According to this month’s report, the CFPB has, as of April 1, handled more than 859,000 complaints across all products, with mortgage complaints accounting for approximately 223,100, making it the second most-complained about product after debt collection. Key findings from the report include the following: (i) approximately 51% of mortgage-related complaints relate to consumers encountering problems when they were having difficulty making payments, such as facing prolonged loss mitigation review processes and receiving conflicting and confusing foreclosure notifications during loss mitigation assistance review; (ii) consumers facing issues involving transfers of their loan to another servicer without being properly informed of the transfers; (iii) loan servicers allegedly providing confusing and contradictory information regarding reinstatement amounts, charges and fees, and interest rates; (iv) loan servicers delaying the release of insurance claim funds allocated to property damages despite consumers having provided all required documentation; and (v) consumers facing prolonged and confusing loan origination processes, resulting in the loss of favorable interest rates and the expiration of rate locks. Consistent with past reports, this month’s issue lists the top 20 most-complained-about companies for mortgage-related complaints, as well as the top ten most-complained-about companies across all financial products. Finally, with more than 118,000 complaints submitted from the state’s consumers as of April 1, the report identifies California as its geographical spotlight, noting that complaints from the state have “generally followed the national trend.”
On March 29, the CFPB released its most recent complaint report focusing on complaints related to debt collection. According to the report, as of March 1, 2016, consumers have submitted approximately 834,400 complaints across all products, with debt collection complaints accounting for approximately 219,200 of the complaints. Debt collection complaints highlighted in the report include, but are not limited to: (i) first- and third-party debt collectors attempting to collect on debts that consumers claim they do not owe; (ii) consumers repeatedly receiving calls from debt collectors, sometimes early in their delinquency or during grace periods; (iii) consumers being contacted while at work, with some alleging that collectors made in-person visits to their workplace; (iv) debt collectors not honoring consumers’ requests to cease communications; and (v) debt collectors failing to provide sufficient information to verify debts. Similar to past CFPB-issued complaint snapshots, the report identifies the top 10 most-complained-about companies in regards to all financial products, as well as the top 20 most-complained-about companies for debt collection. Finally, the report identifies Florida as its geographical spotlight, noting that (i) Florida consumers have submitted more than 80,000 complaints as of March 1, 2016; (ii) mortgage-related complaints account for 30% of complaints received from Florida, exceeding the national average by 4%; and (iii) at 24%, debt collection-related complaints submitted by Florida consumers are 2% less than the national average.
On March 22, the CFPB released its fourth annual report highlighting complaints the agency received in 2015 from servicemembers, veterans, and their families. According to the report, debt collection complaints continue to be the most common. The report states that, between January 1, 2015 and December 31, 2015, the CFPB received more than 19,000 complaints from the military community, 46% of which related to the debt collection industry. Complaints related to mortgages and credit reporting follow at 15% and 11%, respectively. The report also summarizes four public enforcement actions in 2015, noting that the actions provided servicemembers with more than $5 million in refunds and other relief.
On March 7, the CFPB announced that it is now accepting consumer complaints regarding the online marketplace lending industry. The CFPB simultaneously released a consumer bulletin defining the online marketplace lending industry as an online platform used “to connect consumers or businesses who seek to borrow money with investors willing to buy or invest in the loan.” The bulletin recommends that consumers take certain steps before applying for a loan or refinancing certain debt. CFPB Director Cordray did not expand on plans for how the CFPB will address the complaints, beyond noting that, “[b]y accepting these consumer complaints, we are giving people a greater voice in these markets and a place to turn to when they encounter problems.”
On March 1, the FTC released a copy of its Consumer Sentinel Network Data Book, which summarizes consumer complaints reported to the agency between January 2015 and December 2015. The report, which is published annually and covers rankings for 30 different complaint categories, found debt collection to be the highest volume complaint category, with identity theft issues and imposter scams following close behind. The report attributes the rise in debt collection complaints to a data contributor that began to collect complaints via a mobile application, resulting in a significant increase in complaints related to debt collection calls placed to mobile phones. Additional areas of complaints submitted to the FTC included: (i) telephone and mobile service plans, rates, and charges; (ii) auto-related complaints; (iii) banks and lenders; (iv) credit card billing services and notification practices; (v) foreign money offers and counterfeit check scams; and (vi) education advertising and accreditation. Addressing identity theft and debt collection concerns, FTC Director Jessica Rich emphasized the agency’s ongoing work to combat alleged unlawful and deceptive debt collection practices: “Steps like the recent upgrade to IdentityTheft.gov and our leadership of a nationwide initiative to combat unlawful debt collection practices are critical to our ongoing work to protect consumers from these harms.”
On March 1, the CFPB released its most recent complaint report focusing on prepaid products. According to the report, as of February 1, 2016, consumers have submitted approximately 4,300 complaints specific to prepaid products. Findings related to prepaid products highlighted in the report include: (i) consumers are not able to access funds loaded to prepaid cards for extended periods of time; (ii) companies are refusing to re-issue cards with remaining balances to consumers before the originally issued card expires; (iii) consumers are facing various extra charges, such as replacement, monthly, inactivity, and PIN number change fees; and (iv) companies are freezing entire balances when a consumer files a claim to dispute an unexpected charge, making funds unavailable until the claim process is complete. The report also notes that “[c]onsumers who were victims of frauds or scams frequently complained that scammers instructed them to purchase prepaid cards in order to transfer funds to the fraud perpetrators.”
In addition to its focus on prepaid product based complaints, the report identifies the Houston, Texas metropolitan area as its geographical spotlight, noting that as of February 1, 2016, the CFPB has received approximately 63,200 industry-wide complaints from Texas consumers, with about 15,700 coming from Houston consumers alone. A review of the Texas complaints resulted in a highlight of the most-complained-about companies and the most-complained-about consumer financial products and services. Debt collection, mortgage, and credit reporting accounted for the top three most-complained about products in both the Texas sampling and for all consumer complaints submitted to the CFPB’s Consumer Complaint Database.
On January 28, the CFPB released its monthly complaint report focusing on a number of financial services markets, including debt settlement, check cashing, tax refund anticipation checks, money order providers, and credit repair. The report states that, since July 19, 2014, the CFPB has handled approximately 2,700 complaints relating to these other types of financial services. According to the report, debt settlement and credit repair complaints are among the more common complaints, and over a quarter of these complaints mention student loans, with borrowers selecting fraud or scam as their primary issue. Additional findings highlighted in the snapshot include: (i) consumers being charged excessive fees, including upfront fees that are generally prohibited by law, for debt settlement and credit repair services; (ii) consumers encountering problems redeeming money orders, taking issue with the amount of time it took to resolve errors with customer service representatives; and (iii) consumers complaining they were victims of fraud when using money orders and travelers checks. The CFPB identified New York State and the New York metro area as its geographic spotlight in this issue, noting that, as of January 1, 2016, the CFPB has received 50,400 complaints from New York State consumers alone. Similar to past reports, mortgages remain the most complained-about product.
- Sherry-Maria Safchuk to discuss UDAAP at an American Bar Association webinar
- Jeffrey P. Naimon to discuss "What to expect: The new administration and regulatory changes" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Steven R. vonBerg to discuss "LO comp challenges" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss “The False Claims Act today” at the Federal Bar Association Qui Tam Section Roundtable