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On July 7, a settlement was reached with another of the defendants in an action taken by the CFPB against a mortgage lender and several related individuals and companies (collectively, “the defendants”) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR), and Fair Credit Reporting Act (FCRA). As previously covered by InfoBytes, the CFPB filed a complaint in January in the U.S. District Court for the Central District of California claiming the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products, but instead, the defendants allegedly resold or provided the reports to companies engaged in marketing student loan debt relief services. The defendants also allegedly violated the TSR by charging and collecting advance fees for their debt relief services. The CFPB further alleged that defendants violated the TSR and CFPA when they used telemarketing sales calls and direct mail to encourage consumers to consolidate their loans, and falsely represented that consolidation could lower student loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education. An $18 million settlement was reached with several of the defendants in May (covered by InfoBytes here).
The settlement reached with the chief operating officer/part-owner of one of the defendant companies requires the defendant to pay $25,000 of a $7 million settlement—of which the full payment will be suspended provided several obligations are fulfilled. The defendant, who neither admits nor denies the allegations, is permanently banned from providing debt relief services and from accessing, using, or obtaining “prescreened consumer reports” for any purpose. The defendant is also prohibited from using or obtaining consumer reports for any business purposes aside from “underwriting or otherwise evaluating mortgage loans.” The defendant is further required to, among other things, (i) pay a $1 civil money penalty; (ii) comply with reporting requirements; and (iii) fully cooperate with any other investigations.
On May 20, the FTC announced that it and the Utah Division of Consumer Protection amended their complaint against a Utah-based company and its affiliates (collectively, “defendants”) for allegedly using deceptive marketing to persuade consumers to attend real estate events costing thousands of dollars. The amended complaint adds additional defendants and new charges asserting the defendants violated the Telemarketing Sales Rule (TSR). As previously covered by InfoBytes, the U.S. District Court for the District of Utah issued a temporary restraining order against the defendants after the FTC and the Utah Division of Consumer Protection accused the defendants of violating the FTC Act, the Consumer Review Fairness Act (CRFA), and Utah state law, by marketing real estate events with false claims and celebrity endorsements. Among other things, the defendants allegedly told consumers they would (i) earn thousands of dollars in profits from real estate investment “flips” by using the defendants’ products; (ii) receive 100 percent funding for their real estate investments, regardless of credit history; and (iii) receive a full refund if they do not make “‘a minimum of three times’” the price of the workshop within six months. The amended complaint alleges that, in addition to the claims made at the real estate events, the defendants reiterated the false or misleading statements in the course of their telemarketing activities in violation of the TSR.
On March 10, the FTC announced that it obtained default judgments of over $10.7 million against three defendants in a student loan debt relief operation that the FTC alleged violated the FTC Act and the Telemarketing Act. The defendants were alleged to have deceptively marketed services to reduce or eliminate student loan debt and to have tricked borrowers into paying illegal upfront fees for these services. In its order granting the default judgment, in addition to the monetary penalties, the court permanently enjoined the defendants from (i) participating in telemarketing; (ii) selling secured and unsecured debt relief products and services; and (iii) making misrepresentations related to financial products and services.
On January 17, the FTC announced it had reached settlements with a number of defendants alleged to have operated “an unlawful credit repair scam that has deceived consumers across the country.” According to the FTC’s complaint, the defendants purportedly made false representations to consumers regarding their abilities to improve credit scores, falsely promised to remove any negative entries on the consumers’ credit reports, illegally collected upfront fees from consumers before the services were fully performed, and used threats and coercion to intimidate consumers from disputing charges. The FTC alleged these misleading statements and illegal actions violated TILA, the FTC Act, the Telemarketing Act, and the Credit Repair Organizations Act, among other things. Additionally, the FTC claimed that the defendants “routinely engage in electronic fund transfers from consumers’ bank accounts without obtaining proper authorization, and use remotely created checks to pay for credit repair services they have offered through a telemarketing campaign, in violation of the TSR.” The defendants, without admitting or denying the allegations, agreed to settlements that ban the defendants from offering credit repair services through “advertising, marketing, promoting, offering for sale, or selling,” impose a total monetary penalty of nearly $14 million, and require several defendants to turn over the contents of bank and merchant accounts as well as investment and cryptocurrency accounts. See the settlements here, here, and here.
On November 25, the CFPB announced a settlement with two companies that originated and serviced travel-related loans for military servicemembers and their families. According to the consent order with the lender and its principal, the lender (i) charged fees to customers who obtained financing, at a higher rate than those customers who paid in full, but failed to include the fee in the finance charge or APR; (ii) falsely quoted low monthly interest rates to customers over the phone; and (iii) failed to provide the required information about the terms of credit and the total of payments in violation of TILA and the TSR. The consent order prohibits future lending targeted to military consumers and requires the lender and its principal to pay a civil money penalty of $1. The order also imposes a suspended judgment of almost $3.5 million, based on an inability to pay.
In its consent order against the servicer, the Bureau asserts the servicer engaged in deceptive practices by overcharging servicemembers for debt-cancellation products and, in violation of the FCRA’s implementing Regulation V, never established or maintained written policies and procedures regarding the accuracy of information furnished to credit reporting agencies. The consent order issues injunctive relief and requires the servicer to (i) pay a $25,000 civil money penalty; (ii) provide redress to consumers who were allegedly overcharged for the debt-cancellation product; (iii) pay over $54,000 in restitution to borrowers with no outstanding balance on their loans and issue additional account credits to borrowers with outstanding balances; and (iv) establish reasonable policies and procedures for accurate reporting to consumer reporting agencies.