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On February 4, the Washington state attorney general filed a complaint in King County Superior Court against a group of defendants who market services claiming they can release consumers from timeshare contracts. The AG alleges that since 2012, the defendants have unfairly and deceptively contracted with over 32,000 consumers seeking to release timeshare contracts, collecting millions in upfront fees. According to the complaint, the defendants, among other things, advertise their timeshare exit services as being “risk-free” with a 100 percent money-back guarantee; however, the defendants allegedly refuse to issue refunds to clients who face foreclosure, damaged credit ratings, and other negative financial consequences claiming that such outcomes are successful because the clients “technically” no longer own the timeshares. In addition, the AG alleges that the defendants charge clients upfront fees for each timeshare to be exited, and then outsource more than 95 percent of their clients’ files to third-party vendors for significantly discounted rates. These vendors are allegedly left to accomplish the timeshare exits without input or supervision from the defendants and often without a contract governing their work. The complaint alleges violations of the Consumer Protection Act, the Debt Adjusting Act, and the Credit Services Organization Act. The AG seeks numerous remedies including injunctive relief prohibiting the defendants from selling their services and $2,000 in civil penalties per violation of the Consumer Protection Act.
On February 5, the CFPB announced a settlement with a Texas-based payday lender and six subsidiaries (defendants) for allegedly assisting in the collection of online installment loans and online lines of credit that consumers were not legally obligated to pay based on certain states’ usury laws or licensing requirements. As previously covered by InfoBytes, the Bureau filed a complaint in 2017—amended in 2018—against the defendants for allegedly violating the CFPA’s prohibitions on unfair, deceptive, and abusive acts and practices by, among other things, making deceptive demands and originating debit entries from consumers’ bank accounts for loans that the defendants knew were either partially or completely void because the loans were void under state licensing or usury laws. The defendants—who operated in conjunction with three tribal lenders engaged in the business of extending and collecting the online installment loans and lines of credit—also allegedly provided material services and substantial assistance to two debt collection companies that were also involved in the collection of these loans.
Under the stipulated final consent order, the defendants are prohibited from (i) extending, servicing, or collecting on loans made to consumers in any of the identified 17 states if the loans violate state usury limits or licensing requirements; and (ii) assisting others engaged in this type of conduct. Additionally, the settlement imposes a $1 civil money penalty against each of the seven defendants. The Bureau’s press release notes that the order “is a component of the global resolution of the [defendants’] bankruptcy proceeding in the Bankruptcy Court for the Northern District of Texas, which includes settlements with the Pennsylvania Attorney General’s Office and private litigants in a nationwide consumer class action.” The press release also states that “[c]onsumer redress will be disbursed from a fund created as part of the global resolution, which is anticipated to have over $39 million for distribution to consumers and may increase over time as a result of ongoing, related litigation and settlements.”
On June 14, the CFPB announced a settlement with a company that manages student loans for a defunct for-profit educational institution resolving allegations it provided substantial assistance to the institution in engaging in unfair acts and practices in violation of the Consumer Financial Protection Act (CFPA). As previously reported by InfoBytes, the Bureau filed suit against the now-defunct for-profit institution in February 2014. The Bureau’s complaint against the institution alleged that the institution offered first-year students no-interest short-term loans to cover the difference between the costs of attendance and federal loans obtained by students. The complaint asserts that the institution then forced borrowers into “high-interest, high-fee” private student loans without providing borrowers an adequate opportunity to understand their loan obligations, when their short-term loans became due. In the complaint in the current matter, filed the same day as the proposed stipulated judgment, the Bureau alleges that the management company: (i) was substantially involved in the creation and operation of the loan program, including raising money and overseeing the origination and servicing of the loans; and (ii) knew, or was reckless in not knowing, the risks associated with the loan program. The stipulated judgment requires the company to (i) cease enforcement and collection efforts on all outstanding loans associated with the program; (ii) discharge all outstanding loans associated with the program; and (iii) direct credit reporting agencies to delete consumers’ trade lines associated with the loan program. The company must also provide notice of these actions to affected consumers. The proposed judgment does not include a monetary penalty or require refunds to consumers.
On October 29, the New York Attorney General announced the filing of a complaint against a national jewelry store, headquartered in New York, for allegedly engaging in fraudulent and deceptive conduct, deceptive credit repair services, and illegal lending in the financing of jewelry sales to active duty servicemembers. Specifically, the complaint alleges the company targets active duty servicemembers through a purported charitable program in which military-themed teddy bears are sold with a promise of a charitable donation by the company. The company also sells patriotic and military-themed jewelry and offers financing through a program exclusively available to servicemembers. The financing program is marketed as a credit repair or credit-establishing opportunity through a different entity, but according to the complaint, the separate entity is merely an “alter-ego” of the jewelry company, a relationship which is not disclosed to servicemembers. The company markets the financing program to active duty servicemembers as a way to build credit scores to purchase other consumer goods, such as a motor vehicle; however, once a servicemember agrees to the program, the Attorney General alleges the company’s employees are instructed to “’sell’ enough product to maximize the amount of credit [the company] is willing to advance.” The amount of credit is allegedly based on the amount of time the servicemember has left in active service, not on traditional underwriting standards such as credit history. Additionally, the complaint alleges the company marks up poor-quality jewelry between 600 and 1,000 percent over the wholesale price and advertises a “per payday” price on the merchandise, which bears “little resemblance to the total amount paid by a consumer at the end of the financing contract.” Of special interest to all creditors doing business in New York, the complaint appears to include in its civil and criminal usury claims the concept that the effective interest rate was higher because the good being purchased had “inflated retail prices.” The complaint seeks civil money penalties, restitution, and injunctive relief.
- Daniel P. Stipano to moderate "Washington update" at the Puerto Rican Symposium of Anti Money Laundering
- Melissa Klimkiewicz to discuss "Private flood insurance updates" at the Mortgage Bankers Association Servicing Solutions Conference & Expo
- Jonice Gray Tucker and H Joshua Kotin to discuss regulatory compliance issues in the fintech industry at Protiviti's Risk & Compliance Innovation Roundtable
- APPROVED Checkpoint Webcast: CFL overview
- Amanda R. Lawrence and Sherry-Maria Safchuk to discuss "California privacy rule" on an NAFCU webinar
- Sasha Leonhardt to discuss "MLA & SCRA" on a NAFCU webinar
- Daniel P. Stipano to discuss "Pathway of the SARs: Tracking trajectories of suspicious activity reports from alerts to prosecution" at the ACAMS International AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Which bud’s for you? A deep-dive into evolving marijuana laws" at the ACAMS International AML & Financial Crime Conference
- Brandy A. Hood to discuss "RESPA 8 (TRID applied compliance)" 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
- John P. Kromer to discuss "Navigating the multi-state fintech regulatory regime" at the American Conference Institute Legal, Regulatory and Compliance Forum on Fintech & Emerging Payment Systems
- Jonice Gray Tucker to discuss "Leveraging big data responsibly" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Hank Asbill to discuss "Critique of direct examination; Questions and answers" at the American Bar Association Section of Litigation Anatomy of a Trial: Murder Trial of Ziang Sung Wan
- Hank Asbill to discuss "What judges want from trial lawyers" at the American Bar Association Section of Litigation Anatomy of a Trial: Murder Trial of Ziang Sung Wan
- Steven R. vonBerg to speak at the "Conference super session" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference