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  • PA AG settles with collector over payday loan scheme

    State Issues

    On April 9, the Pennsylvania attorney general announced settlements with the former CEO of a since-dissolved lender and a debt collector to resolve claims that the collector charged borrowers interest rates as high as 448 percent on loans and lines of credit. The AG alleged that the former CEO “participated in, directed and controlled” business activities related to the allegedly illegal online payday lending scheme, while the debt collector collected more than $4 million related to Pennsylvania consumers’ loan accounts. The terms of the settlement require the individual defendant to comply with relevant consumer protection laws and limits the individual defendant’s ability to work in the consumer lending industry in Pennsylvania for the next nine years. Additionally, the individual defendant is required to pay the Commonwealth $3 million.

    The AG’s office noted that the U.S. District Court for the Eastern District of Pennsylvania also approved a settlement with the debt collector, which requires the company to comply with relevant consumer protection laws and, among other things, undertake the following actions: (i) ensure that all acquired debts, for which it attempts to collect, comply with applicable laws and regulations; (ii) cancel all balances on applicable accounts, take no further action to collect debts allegedly owed by Pennsylvania consumers on these accounts, and notify consumers of the cancellations; (iii) “refrain from engaging in [c]ollections on any [d]ebts involving loans made over the internet by [n]on-bank lenders that violate Pennsylvania laws,” including its usury laws; and (iv) will not sell, re-sell, or assign debt related to applicable accounts, including accounts subject to a previously-negotiated nationwide class action settlement agreement and Chapter 11 bankruptcy plan. Previous InfoBytes coverage related to the payday lending scheme can be found here, here, and here.

    State Issues Courts State Attorney General Interest Rate Usury Consumer Finance Settlement Enforcement Debt Collection Payday Lending

  • CFPB action against debt settlement firm targets abusive acts

    Federal Issues

    On April 13, the CFPB entered into a preliminary settlement with an online debt-settlement company for allegedly violating the CFPA’s prohibition on abusive acts or practices and failing to clearly and conspicuously disclose total cost under the Telemarketing Sales Rule. The complaint alleges that the company took “unreasonable advantage of consumers’ reasonable reliance that [it] would protect their interests in negotiating their debts” by failing to disclose its relationship to certain creditors and steering consumers into high-cost loans offered by affiliated lenders. The CFPB alleges that the company regularly prioritized creditors with which it had undisclosed relationships in settlements of consumers’ debts. Under the terms of the proposed stipulated final judgment and order, the CFPB is seeking restitution, damages, disgorgement, and civil money penalties.

    In the Bureau’s announcement, acting Director David Uejio states that “[t]he CFPB will not tolerate companies that purport to represent consumers, but instead abuse their trust in a self-dealing scheme. This case provides a clear example of what Congress intended to prohibit when it created the CFPB and gave it authority to prevent abusive practices.”

    Federal Issues CFPB Abusive UDAAP Consumer Finance Settlement Enforcement Debt Collection Debt Settlement TSR CFPA

  • Court signals approval of tribal lending settlement

    Courts

    On April 7, the U.S. District Court for the Eastern District of Virginia preliminarily approved a revised class action settlement concerning allegations that an operation used tribal sovereign immunity to evade state usury laws when charging unlawful interest on loans. The plaintiffs filed a class action complaint against the operation alleging, among other things, violations of the Racketeer Influenced and Corrupt Organizations Act, EFTA, and TILA. The preliminarily-approved revised settlement would cancel approximately 71,000 class member loans, including a group of loans sold by the operation to another investor. It would also require the operation to pay $86 million, including an additional $21 million payment from the individual defendant, and cap attorneys’ fees for class counsel at $15 million. The operation would also be required to comply with several non-monetary provisions, including (i) requesting that negative credit reporting information concerning the loans be deleted; and (ii) ensuring that key loan terms, including interest rates and payment schedules to borrowers, are disclosed in loan agreements in compliance with federal law.

    Courts Class Action Settlement Tribal Lending Online Lending Consumer Finance Usury RICO TILA EFTA

  • FTC settles with sellers of antennas, signal amplifiers

    Federal Issues

    On April 8, the U.S. District Court for the Southern District of New York issued a nearly $32 million judgment against the owners and operators of a New York-based enterprise that sells antennas and amplifiers (collectively, “defendants”) for allegedly misleading customers about the quality of their products. The agency alleges in its complaint that the defendants violated the FTC Act by “making deceptive performance claims for their over-the-air television antennas and related signal amplifiers, using deceptive consumer endorsements, and misrepresenting that some of their web pages were objective news reports about the antennas.” Under the terms of the order, the company is barred from making misleading claims about the products’ quality, the number of channels users can acquire, or any other claims about its ranking compared to other products. While the order imposes a $32 million judgment against the defendants, the full judgment will be suspended upon payment of $650,000, subject to certain conditions.

    Federal Issues FTC Settlement UDAP Deceptive FTC Act Enforcement

  • CFPB settles with California-based company for debt collection violations

    Federal Issues

    On April 6, the CFPB announced a consent order against a California-based debt collector and its former owner for allegedly harassing consumers and threatening to take legal action if they did not pay their debts. According to the CFPB, the respondents violated the FDCPA and the CFPA’s prohibition against deceptive acts or practices by mailing letters to consumers printed with “Litigation Notice” that threatened recipients with legal action if they did not repay their debts. However, the Bureau stated that the respondents did not file lawsuits against the consumers, nor did they hire law firms or lawyers to obtain any judgments or collect on any such judgments. Under the terms of the consent order, the respondents are permanently banned from the debt collection industry and are ordered to pay $860,000 in redress to its victims, which has been suspended due to an inability to pay, as well as a $2,200 civil money penalty. This is the CFPB’s latest action taken against debt collectors that have used false threats to collect debts. As previously covered in InfoBytes, in 2019 the CFPB and New York attorney general announced proposed settlements with a network of New York-based debt collectors to resolve allegations that the defendants engaged in improper debt collection tactics in violation of the CFPA, the FDCPA, and various New York laws. Also, in 2018, the CFPB announced a settlement with a Kansas-based company and its former CEO and part-owner that allegedly engaged in improper debt collection tactics in violation of the CFPB’s prohibitions on engaging in unfair, deceptive, or abusive acts or practices (covered by InfoBytes here).

    Federal Issues Consumer Finance CFPB Settlement Enforcement Debt Collection CFPA FDCPA UDAAP Deceptive

  • FINRA fines broker-dealer for alleged supervision failures

    Securities

    On April 5, the Financial Industry Regulatory Authority (FINRA) entered into a Letter of Acceptance, Waiver, and Consent (AWC), with a New York-based broker-dealer subsidiary of a global financial services company to resolve allegations that it failed to monitor employees’ outside brokerage accounts for “potentially deceptive trading practices.” Among other things, FINRA alleged that the firm’s failure to maintain a supervisory system to ensure employees disclosed their outside brokerage accounts precluded the personal account trading team from accurately monitoring account activity for compliance with the firm’s trading restrictions. FINRA further indicated that “[w]hile the firm ultimately was able to review the relevant trading activity, the inability to do so earlier led to the firm’s failure to timely monitor trading in these accounts.” The firm neither admitted nor denied the findings set forth in the AWC letter but agreed to pay a $345,000 fine.

    Securities FINRA Enforcement Settlement

  • Italian company settles with OFAC for violating Iranian Transactions and Sanctions Regulations

    Financial Crimes

    On March 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $950,000 settlement to resolve alleged violations of the Iranian Transactions and Sanctions Regulations with an Italian company that produces and reexports air pressure switches. According to OFAC’s accompanying web notice, between 2013 and 2017, the company allegedly “knowingly reexported 27 shipments of air pressure switches procured from a U.S. company intended for as many as ten customers in Iran and caused a U.S. company to indirectly export its goods to Iran.” OFAC also alleged that the company engaged in efforts to obfuscate its reexportation of goods from the U.S. to Iranian end-users by, among other things, having employees use deceptive replacement terms for Iran in communications with the U.S company in order to avoid referencing Iranian end-users, and requesting that the term “Made in USA” be removed from the switches to disguise their origin.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company willfully reexported air pressure switches even though it knew it was violating U.S. sanctions; (ii) company management “either failed to provide effective oversight of its employees and operations or chose to ignore these prohibited trade practices”; and (iii) the conduct caused over $2.5 million worth of goods to be diverted from the U.S. to Iran.

    OFAC also considered various mitigating factors, including that the company (i) has not received a penalty notice from OFAC in the proceeding five years; (ii) ceased the conduct at issue and took remedial measures, including implementing a sanctions compliance program and agreeing to enhanced compliance commitments; and (iii) cooperated with OFAC’s investigation.

    Financial Crimes OFAC Department of Treasury Sanctions OFAC Designations Enforcement Settlement Iran Of Interest to Non-US Persons

  • OFAC settles with manufacturer for violating Iranian Transactions and Sanctions Regulations

    Financial Crimes

    On March 15, the U.S. Treasury Department’s Office of Foreign Assets Control announced a $216,464 settlement with an Ohio-based manufacturer for alleged violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s web notice, between 2013 and 2017, the company allegedly failed to act on multiple apparent warning signs and exported multiple shipments of goods to two European companies despite having “reason to know that the goods were intended specifically for supply, transshipment, or reexportation to Iran by the two European companies.” OFAC noted that the company voluntarily self-disclosed the apparent violations and acknowledged that it “had actual knowledge” that some of the transactions were intended specifically for reexportation to Iran.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the company failed to follow up on multiple warning signs that the European companies were reexporting goods to Iran; (ii) senior leadership knew or should have known the goods were being reexported to Iran; and (iii) the company and senior leadership “had actual knowledge” that the two final shipments were to be reexported to an Iranian end-user.

    OFAC also considered various mitigating factors, including that the company (i) has had no prior sanctions history with OFAC; (ii) ceased all shipments to the European companies when it made its disclosure and requested that the goods be returned; (iii) cooperated with OFAC’s investigation and entered into tolling agreements; and (iv) strengthened its trade compliance and export policies and procedures to minimize the risk of similar violations from occurring in the future. 

    Financial Crimes Department of Treasury OFAC Enforcement Settlement Sanctions OFAC Designations Iran

  • FTC permanently bans debt collectors

    Federal Issues

    On March 15, the FTC announced that defendants in two cases will be permanently banned from the debt collection industry. As previously covered by InfoBytes, the FTC filed complaints against the defendants last year alleging the defendants used deceptive tactics to threaten false legal action through the use of robocalls to collect debts consumers did not owe or the operation did not have the right to collect. The actions were taken as part of the FTC’s “Operation Corrupt Collector”—a nationwide enforcement and outreach effort established by the FTC, CFPB, and more than 50 federal and state law enforcement partners to target illegal debt collection practices (covered by InfoBytes here).

    Under the terms of the settlements (see here, here, and here), in addition to being permanently banned from participating in debt collection and debt brokering activities, the defendants are also prohibited from making misrepresentations to consumers, including (i) whether consumers are legally obligated to pay defendants; (ii) whether defendants are attorneys or affiliated with a law firm; (iii) the terms of any refund policy; and (iv) any material facts concerning products or services. The settlements also include monetary judgments of approximately $16.4 million and $11.2 million, which are both partially suspended due to the defendants’ inability to pay.

    Federal Issues FTC Enforcement Debt Collection Settlement

  • States reach data breach settlement with debt collector

    State Issues

    On March 11, a coalition of 41 state attorneys general, led by the New York attorney general, announced a settlement with a bankrupt debt collection agency to resolve a multistate investigation into a 2019 data breach that allegedly exposed the personal information of more than 21 million individuals, including Social Security numbers, payment card information, and in certain instances, medical test names and diagnostic codes. According to the proposed consent order, an unauthorized user accessed the company’s internal system and accessed consumers’ personal information. The AGs claimed that “[d]espite numerous warnings from banks that processed its payments about a potential breach, [the company] failed to detect the intrusion.” Under the terms of the settlement, the company has agreed to implement data security practices to strengthen its information security program and safeguard consumers’ personal information. These measures include: (i) creating and implementing an information security program that includes an incident response plan; (ii) employing a chief information security officer to oversee data safety practices; and (iii) hiring a third-party assessor to conduct an information security assessment. Additionally, should the company fail to honor the injunctive terms of the settlement it may be liable for as much as $21 million.

    State Issues State Attorney General Data Breach Privacy/Cyber Risk & Data Security Settlement

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