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  • FTC Takes Action against Debt Relief Operation

    Consumer Finance

    On February 24, the FTC announced that it charged a debt relief operation and two individuals with violations of the FTC Act and the Telemarketing Sales Rule (TSR). According to the FTC, the named defendants misrepresented their ability to help financially distressed homeowners and student loan borrowers modify their loans. Additionally, one of the companies involved in the debt relief operation and its owner also were charged with violations of the Mortgage Assistance Relief Services (MARS) rule/ Regulation O for (i) failing to provide homeowners with disclosures during the purported loan restructure process; (ii) charging upfront fees to consumers for mortgage assistance relief services; (iii) advising homeowners to cease communication with lenders or servicers; and (iv) misrepresenting material aspects of  their mortgage assistance relief services. The FTC’s February 16 complaint seeks to permanently enjoin the named defendants from future violations of the FTC Act, the TSR, and the MARS Rule/Regulation O as well as obtain redress for injured consumers through rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.

    FTC Telemarketing Sales Rule Debt Settlement

  • FTC Announces Settlement Over Alleged Telemarketing Sales Rule Violations

    Consumer Finance

    On February 11, the FTC announced that an Atlanta-based Independent Sales Organization (ISO) agreed to settle charges that it violated the Telemarketing Sales Rule (TSR) by assisting and facilitating deceptive telemarketing acts. According to the FTC, from 2010 through January 2013, the ISO knowingly, or with deliberate ignorance, enabled a deceptive telemarketing operation to obtain and maintain merchant accounts so that it could process consumers’ credit card payments through certain payment networks. The FTC alleged that the ISO ignored a series of red flags concerning the operation’s deceptive telemarketing scheme, such as (i) a high volume of returns and chargebacks; (ii) numerous chargeback complaints from consumers claiming to be victims of fraud; and (iii) alerts from other financial institutions that the operation engaged in fraudulent or deceptive activities. The FTC and the states of New York and Florida sued the operation in 2013, and only then did the ISO terminate its relationship with the operation. In addition to imposing a $2.6 million monetary judgment, which the FTC partially suspended due to financial constraints, the February 3 settlement order requires the ISO to (i) screen prospective clients that meet certain criteria; (ii) monitor sales activity to identify signs of deceptive conduct; and (iii) terminate contracts with persons engaged in deceptive conduct. Finally, the ISO is “banned from payment processing or acting as an ISO for several categories of clients and prohibited from assisting or facilitating any merchant it knows, or should know, is violating the FTC Act or the TSR.”

    FTC Telemarketing Sales Rule

  • FTC and Florida AG Take Action Against Payment Processing Operation

    Consumer Finance

    On January 8, the FTC and Florida Attorney General Pam Bondi announced an amended complaint against a California-based processing sales organization, its three executives, and three telemarketing company owners (collectively “the defendants”) for alleged violations of the (i) Telemarketing and Consumer Fraud and Abuse Protection Act; (ii) the FTC Act; (iii) the FTC’s Telemarking Sales Rule; and (iv) the Florida Deceptive and Unfair Trade Practices Act. According to the complaint, the defendants operated a nation-wide debt relief scam by cold calling consumers and making false promises that they could “reduce consumers’ interest rates on their credit cards, save consumers thousands of dollars in a short time period, and refund consumers’ money if the promised savings were not realized.” The FTC and AG Bondi allege that, from at least November 2012 to October 2014, the defendants solicited at least 26 “‘straw men’” to act as signatories on “shell businesses and dummy merchant accounts” that were used to process consumer credit card payments. The FTC is seeking injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, the disgorgement or ill-gotten monies, and other equitable relief; Florida AG Bondi is seeking injunctive relief, restitution, costs and attorneys’ fees, as well as other equitable relief.

    FTC State Attorney General Enforcement Telemarketing Sales Rule

  • FTC Amends Telemarketing Sales Rule, Bans Payment Methods Used by Scammers

    Fintech

    On November 18, the FTC announced that it approved, by a 3-1 vote, final amendments to the Telemarketing Sales Rule (TSR) that ban telemarketers from using certain payment methods that are commonly used by scammers. Per the amendments, telemarketers are prohibited from (i) using specific types of checks and “payment orders” that are remotely created by the telemarketer or seller and which permit direct access to consumers’ bank accounts; (ii) receiving payments through traditional “cash-to-cash” money transfers, which allow scammers to easily obtain consumer funds anonymously and without the ability to reverse the transaction; and (iii) accepting as payment “cash reload” mechanisms. The FTC concluded that the aforementioned payment methods constituted abusive practices because they caused or were likely to cause “substantial injury to consumers that is neither reasonably avoidable by consumers nor outweighed by countervailing benefits to consumers or competition.” Finally, according to the FTC, “the amendments address changes in the financial marketplace to ensure consumers remain protected by the TSR’s antifraud provisions, but are narrowly tailored to allow for innovations with respect to other payment methods that are used by legitimate companies.”

    FTC Telemarketing Sales Rule Payment Processors

  • CFPB Sues World Law Group Over Illegal Fees and False Promises in Debt-Relief Scheme

    Consumer Finance

    On September 15, the CFPB announced a preliminary injunction obtained against World Law Group and its senior leaders for allegedly running a debt-relief scheme that charged consumers costly and illegal upfront fees. According to the CFPB, “the debt-relief scheme falsely promised consumers a team of attorneys to help negotiate debt settlements with creditors, failed to provide legal representation, and rarely settled consumers’ debts.” Specifically, the complaint alleges that defendants charged consumers upfront fees before providing debt-relief services in violation of the Telemarketing Sales Rule. The complaint also alleges that World Law Group falsely promised legal representation to consumers who did not receive the promised legal representation. The underlying lawsuit remains pending following the granting of the preliminary injunction.

    CFPB UDAAP Debt Collection Telemarketing Sales Rule Debt Settlement

  • CFPB Files Complaint Against Student Financial Aid Consulting Company for Allegedly Illegal Sales and Billing Practices

    Consumer Finance

    On July 23, the CFPB announced that it had entered into a proposed consent order with a Sacramento-based company that provides fee-based student financial aid counseling and preparation services. The CFPB’s simultaneously filed complaint alleges that the company violated the Telemarketing and Consumer Fraud and Abuse Prevention Act by engaging in deceptive sales tactics through its websites and call center representatives. The complaint claims that from at least July 21, 2011 to present (recognizing that the company no longer operates one of the websites effective July 13, 2015), the company offered consumers certain services “as an upgrade from its ‘standard’ service level at ‘no additional cost.’” However, consumers were allegedly charged future annual fees of $67 to $85 for such upgrades. The Bureau also alleges that the company violated the Electronic Fund Transfer Act by enrolling consumers in automatic, recurring payments without their knowledge or consent: “The Company did not provide consumers a copy of the consumers’ authorization for electronic fund transfers in which the terms of the preauthorized transfers – including automatic, recurring charges going forward – were clear and readily understandable.” The proposed consent order would require the company to pay $5.2 million in consumer relief and cancel all automatic and recurring charges currently in place. Due to the company’s limited financial resources, the proposed order seeks a civil money penalty of $1.00.

    CFPB Student Lending Telemarketing Sales Rule Electronic Fund Transfer

  • Federal Appeals Court Upholds District Court Order Barring Telemarketers From Selling Mortgage And Debt Relief Programs

    Lending

    This month, the U.S. Court of Appeals for the Sixth Circuit issued a decision to uphold the District Court of Northern Ohio’s earlier ruling prohibiting the defendants from selling false mortgage assistance and debt relief programs through a telemarketing scheme. F.T.C. v. E.M.A. Nationwide, Inc., No. 1:12-CV-2394 (N.D. Ohio Aug. 27, 2013). Since at least mid-2010, the defendants were allegedly deceiving consumers by promising that the programs would “help them pay, reduce, or restructure their mortgage and other debts.” According to the FTC’s press release, in September 2012, the defendants were charged with violations of: (i) the FTC Act; (ii) the Commission’s Telemarketing Sales Rule; and (iii) the Mortgage Assistance Relief Services Rule. The court ordered the defendants to jointly pay restitution of more than $5.7 million to the consumers affected by the fraudulent practices.

    FTC Telemarketing Sales Rule

  • CFPB Enforcement Action Targets Debt Settlement Payment Processing

    Consumer Finance

    On October 3, the CFPB announced an enforcement action against a leading debt-settlement payment processor and its President/CEO for allegedly assisting clients in the debt-settlement industry charge and collect millions of dollars in unlawful fees since October 2010.  According to the complaint, the defendants “knew or consciously avoided knowing” that the company’s services were used to charge illegal upfront fees in violation of the Telemarketing Sales Rule to more than 11,000 consumers across multiple states.  The defendants agreed to a consent order that will:  (i) prohibit the company from processing payments for debt-settlement companies and for members of the related mortgage-settlement industry going forward; (ii) subject the parties to regular monitoring by and reporting to the CFPB, as well as recordkeeping requirements; and (iii) mandate a civil money penalty of $1.376 million.  On the date announced, Deputy Director Steve Antonakes remarked that the action should send a message that the CFPB is “working to ensure federal consumer laws are being followed at every stage of the process, including taking action against those who unlawfully facilitate illegal conduct of others.”

    The CFPB has already taken action against the debt-settlement companies themselves, obtaining judgments against two companies in 2012 and 2013 and filing a complaint against four others in May.

    CFPB Enforcement Telemarketing Sales Rule Payment Processors

  • CFPB Announces Suit Against Debt Settlement Firm

    Consumer Finance

    On August 20, the CFPB announced an enforcement action against a debt settlement company for violations of the Telemarketing Sales Rule and the Dodd-Frank Act. The complaint alleges that the company disguised illegal upfront fees charged for debt-relief services as bankruptcy-related charges and deceived consumers into believing they would become debt free when only “a tiny fraction” of its customers actually do. The enforcement action follows a lawsuit filed against the CFPB on July 22, in which the same debt settlement company and an attorney jointly accused the CFPB of “grossly overreaching its authority” in the investigation on which the enforcement action is based.

    CFPB Dodd-Frank Enforcement Telemarketing Sales Rule

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