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  • OFAC reaches multiple settlements with companies that conspired to export equipment to Iran

    Financial Crimes

    On July 19, OFAC announced a $415,695 settlement with the United Arab Emirates (UAE)-based head regional office of a Sweden-based equipment company for apparent violations of the Iranian Transactions and Sanctions Regulations (ITSR). According to OFAC’s website notice, between 2015 and 2016, the UAE company allegedly conspired with Dubai- and Iran-based companies to export equipment from the U.S. to Iran. As a result, the UAE company caused its U.S.-based affiliate to indirectly export goods to Iran by incorrectly listing a Dubai-based company on its export documentation as the end-user. The conspiracy also allegedly included the organization of additional sales of the equipment in the same manner as the initial sale, which ultimately ended when the U.S. Department of Commerce’s Bureau of Industry and Security requested post-shipment verification that showed certain products in question were reexported to Iran.

    In arriving at the settlement amount, OFAC considered various aggravating factors, including that (i) the UAE company did not voluntarily self-disclose the apparent violations; (ii) the UAE company “willfully violated the ITSR” by conspiring to export goods from the U.S. to Iran by “obfuscating the end-user’s identity from its U.S. affiliate,” thus causing the U.S. affiliate to violate the ITSR; (iii) multiple managers had actual knowledge of the conduct giving rise to the apparent violations; and (iv) the UAE company “caused harm to the integrity of the ITSR by circumventing U.S. sanctions and conferring an economic benefit to Iran’s energy sector.”

    OFAC also considered various mitigating factors, including that (i) none of the relevant subsidiaries, including the UAE company, have received a penalty notice from OFAC in the preceding five years; (ii) the UAE company, through the U.S. affiliate, conducted an internal investigation resulting in numerous remedial measures, including taking disciplinary actions against participating individuals, adopting an enhanced review and screening process for Iran-related transactions, and conducting additional in-person training; and (iii) the UAE company, through the U.S. affiliate, provided substantial cooperation to OFAC during the investigation.

    OFAC separately reached a $16,875 settlement with a Virginia-based U.S. subsidiary for its apparent ITSR violations arising from this matter. The Virginia subsidiary did not voluntarily self-disclose the apparent violations, but agreed to the settlement on behalf of a former Pennsylvania-based subsidiary that allegedly referred a known Iranian business opportunity to its foreign affiliate in Dubai. This foreign affiliate, OFAC claimed, then “orchestrated a scheme to export goods” from the U.S. to Iran.

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

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  • District Court approves $35 million settlement in student debt-relief action

    Courts

    On July 14, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against the named defendant in a 2019 action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney, which had alleged a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint asserted that the defendants violated the CFPA, the Telemarketing Sales Rule, and various state laws. A second amended complaint also included claims for avoidance of fraudulent transfers under the FDCPA and California’s Uniform Voidable Transactions Act.

    In 2019, the named defendant filed a voluntary petition for Chapter 11 relief, which was later converted to a Chapter 7 case. As the defendant is a Chapter 7 debtor and no longer conducting business, the Bureau did not seek its standard compliance and reporting requirements. Instead, the finalized settlement prohibits the defendant from resuming operations, disclosing or using customer information obtained during the course of offering or providing debt relief services, or attempting “to collect, sell, assign, or otherwise transfer any right to collect payment” from any consumers who purchased or agreed to purchase debt relief services. The defendant is also required to pay more than $35 million in redress to affected consumers, a $1 civil money penalty to the Bureau, and $5,000 in civil money penalties to each of the three states.

    The court previously entered final judgments against several of the defendants, as well as a default judgment and order against two other defendants (covered by InfoBytes here, here, here, and here).

    Courts CFPB Enforcement State Attorney General State Issues CFPA UDAAP Telemarketing Sales Rule FDCPA Student Lending Debt Relief Consumer Finance Settlement

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  • District Court approves final settlement in tribal lending class action

    Courts

    On July 9, the U.S. District Court for the Eastern District of Virginia granted final approval of a revised class action settlement, certifying the settlement class, approving the settlement terms, and entering final judgment regarding allegations that an operation used tribal sovereign immunity to evade state usury laws when charging unlawful interest on loans. As previously covered by InfoBytes, in March, 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 settlement cancels roughly 71,000 loans, requires the operation to pay $86 million in damages, and caps fees at $15 million. According to the final approval, the court finds the revised settlement to be “fair, reasonable, and adequate.”

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

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  • District Court’s order targets debt settlement firm’s abusive acts

    Courts

    On July 2, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against an online debt-settlement company to resolve CFPB allegations concerning violations of the TSR and the CFPA’s prohibition on abusive acts or practices. As previously covered by InfoBytes, the Bureau filed a complaint against the company in April claiming it took “unreasonable advantage of consumers’ reasonable reliance that [the company] 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 Bureau also alleged that the company regularly prioritized creditors with which it had undisclosed relationships when settling consumers’ debts. Under the terms of the order, the company—who neither admits nor denies the allegations except as specified—is required to pay approximately $646,769 in redress and a $750,000 civil money penalty. The company is also (i) prohibited from settling consumers’ debts owed to any affiliated company with which it shares direct or indirect ownership; (ii) required to disclose to consumers any affiliation with any provider of the specific loans; and (iii) required to notify consumers with currently enrolled debts that it will no longer seek to settle those debts. Additionally, the company is required to comply with the TSR when marketing or selling any debt relief products or services, including by providing accurate disbursement amounts, not charging settlement-performance fees, clearly disclosing estimated costs, and not misrepresenting any material facts.

    Courts CFPB Enforcement Abusive UDAAP Consumer Finance Settlement Debt Collection Debt Settlement Telemarketing Sales Rule CFPA

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  • District Court approves $6.02 million settlement in student debt-relief action

    Courts

    On July 1, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against two defendants in a 2019 action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney, which alleged a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the complaint asserted the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments.

    The finalized settlement issued against the two relief defendants, who neither admit nor deny the allegations except as specifically stated, requires the payment of $3.98 million by one defendant and $2.04 million by the other. However, based on the defendant’s inability to pay, full payment of the $2.04 million will be suspended. The finalized settlement also ordered the paying relief defendant to disgorge any funds held in accounts in excess of the $3.98 million, “including any income such as interest, dividends, and capital gains, as of the date the funds are transferred.” Moreover, both relief defendants are required to grant all rights and claims of identified assets to the Bureau, as well as any assets “currently in the possession, custody, or control of the Receiver.”

    The court previously entered final judgments against several of the defendants, as well as a default judgment and order against two other defendants (covered by InfoBytes here, here, and here). Orders have yet to be entered against the remaining defendants.

    Courts CFPB Enforcement State Attorney General State Issues CFPA Telemarketing Sales Rule Student Lending Debt Relief Consumer Finance Settlement

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  • Robocaller to pay $1.8 million

    Courts

    On June 29, the U.S. District Court for the Western District of Oklahoma granted final approval to a $1.75 million class action settlement involving a now-bankrupt, marketing company hired to place pre-recorded robocalls on behalf of a home security company without receiving consumers’ prior written express consent, in alleged violation of the TCPA. According to the motion for final approval of class settlement, the lead plaintiff alleged, among other things, that the marketing company was directly liable for calls advertising home security services placed using an automated soundboard system, and that the home security company was vicariously liable for hiring the marketing company to place the calls. In this case, the court decided in summary judgment that the soundboard technology used to place the calls at issue (“rather than traditional unattended prerecorded messages”) was regulated by the TCPA, an issue that the plaintiff believes to be of first impression. The settlement agreement also enjoins the company “from initiating any telephone call to any telephone line that delivers a prerecorded message and/or using soundboard technology to deliver a prerecorded message where the principal purpose of the telephone call is advertising or marketing, unless the called party has provided prior express written consent to receive such calls.” Additionally, as noted in the motion, the court previously granted final approval to a $1.85 million class wide settlement with the alarm company last November.

    Courts Autodialer Class Action Settlement TCPA Soundboard

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  • District Court grants emotional damages award in FDCPA Case

    Courts

    On June 17, the U.S. District Court for the Western District of Washington awarded plaintiffs approximately $62,000 in damages, including $60,000 for emotional distress, after suing a debt collector for alleged Washington Collection Agency Act and FDCPA violations when the defendant allegedly attempted to collect more than what was owed and allegedly made false and misleading statements when attempting to collect. According to the amended findings of fact and conclusions of law, the court previously granted the plaintiffs’ motion for summary judgment, finding that the defendant’s actions had violated Sections 1692e, 1692e(2), 1692e(8), and 1692f of the FDCPA, in addition to a provision of the Washington Collection Agency Act entitling them to damages under the Washington Consumer Protection Act. These actions included attempts to collect amounts not owed in three separate phone calls with one of the plaintiffs, one letter that was sent to both plaintiffs, and repeated and ongoing credit reporting of an inflated balance. The defendant allegedly made false and misleading statements, including that a judgment had been entered for the alleged debt, claiming that “Plaintiffs’ wages would be garnished, that plaintiffs had been evicted, and that various charges and fees were legitimate.” Though the defendant admitted the statements were made in error, the court ruled that the plaintiffs “did not need to meet the intentional infliction of emotional distress standard to recover” in this case under the FDCPA. The defendant’s actions caused the plaintiffs “stress, anxiety, feelings of helplessness and hopelessness, and other forms of general emotional distress … at a particularly vulnerable time for both plaintiffs, as they were experiencing the joy and challenges of raising a new baby.” The court awarded each of the two plaintiffs $30,000 in emotional distress damages.

    Courts FDCPA Debt Collection Settlement State Issues

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  • District Court approves new settlement in student debt-relief action

    Courts

    On June 15, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against one of the defendants in an action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney in 2019, which alleged a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the complaint asserts the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments.

    The finalized settlement issued against the relief defendant—who acted in an individual capacity and also as trustee of a trust, and who neither admits nor denies the allegations—requires the liquidation of certain assets up to but not exceeding $3 million as monetary relief to go to the CFPB and the People of the State of California. If the liquidation value of the asset is less than $3 million, the relief defendant “will be additionally liable for the difference between the liquidation value of the [asset] and $3,000,000, up to but not exceeding $500,000.” The relief defendant is also liable to all plaintiffs for $88,381.80. In addition, the relief defendant must comply with certain reporting and recordkeeping requirements and fully cooperate with the plaintiffs.

    The court previously entered final judgments against four of the defendants, as well as a default judgment and order against two other defendants (covered by InfoBytes here and here). Orders have yet to be entered against the remaining defendants.

     

    Courts CFPB State Attorney General State Issues CFPA Telemarketing Sales Rule Student Lending Debt Relief Consumer Finance Enforcement Settlement

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  • 2nd Circuit overturns ruling in favor of defendant in FDCPA case

    Courts

    On June 4, the U.S. Court of Appeals for the Second Circuit overturned a district court’s  decision, holding that a debt collector’s offer to settle an outstanding debt did not require informing the consumer that the balance could increase as a result of interest and fees. The plaintiff allegedly incurred credit card debt, which was then placed with the defendant for collection. The defendant sent the plaintiff a collection letter offering to settle the account for less than what was owed. The plaintiff sued, alleging that the letter violated Section 1692e of the FDCPA because it did not specify that interest was accruing on the balance. The district court, relying on the 2nd Circuit’s 2016 decision in Avila v. Riexinger & Associates, held that the defendant violated the FDCPA because the letter did not indicate that the balance would increase as a result of interest and fees.

    On appeal, the 2nd Circuit clarified that its Avila decision discussed two exceptions, or “safe harbors,” to the requirement for debt collectors to disclose the possibility of interest and fees accruing, which are if the collection notice: (i) “ accurately informs the consumer that the amount of the debt stated in the letter will increase over time”; or (ii) “clearly states that the holder of the debt will accept payment in the amount set forth in full satisfaction of the debt if payment is made by a specified date.” The 2nd Circuit pointed out that the “payment of an amount that the collector indicates will fully satisfy a debt excludes the possibility of further debt to pay.” The appellate court further held that “a settlement offer need not enumerate the consequences of failing to meet its deadline or rejecting it outright so long as it clearly and accurately informs a debtor that payment of a specified sum by a specified date will satisfy the debt.” Therefore, the appellate court concluded that the collection notice to the consumer did not violate FDCPA section 1692e “because it extended a settlement offer that, if accepted through payment of the specified amount(s) by the specified date(s), would have cleared [the plaintiff’s] account.”

    Courts Second Circuit Appellate FDCPA Settlement UDAP Credit Cards

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  • Bank reaches auto loan settlement

    Courts

    On June 8, the U.S. District Court for the Central District of California preliminarily approved a class action settlement, resolving allegations that a national bank failed to properly refund payments made pursuant to guaranteed asset protection waiver (GAP Waiver) agreements entered into in connection with auto loans. As previously covered by InfoBytes, the plaintiffs claimed that the bank knowingly collected unearned fees for GAP Waivers and allegedly “concealed its obligation” to issue refunds on GAP Waiver fees for the portion of the GAP Waiver’s initial coverage that was cut short by early payoff. The bank sought dismissal of the suit, arguing, among other things, that—with the exception of one consumer’s claims—all of the plaintiffs’ contracts include “a condition precedent under which the [p]laintiffs must first submit a written refund request for unearned GAP fees before being entitled to a refund,” a condition, the bank argued, which was not fulfilled. The court dismissed breach of contract claims brought by the majority of the plaintiffs, noting that most of the plaintiffs were not excused from complying with the condition precedent in their contracts with the bank. The court did, however, allow claims filed by plaintiffs whose contracts did not contain condition precedent language to proceed.

    Under the terms of the preliminary settlement reached between the parties, beginning in 2022 and continuing for four years, the bank is obligated to automatically refund unearned GAP fees to consumers who pay off their auto loans early, and will pay refunds along with compensation for the loss of the use of the funds to class members who have not yet received such payment. The bank will also add $45 million in a “supplemental” settlement fund to cover refunds, additional compensation payments, and other settlement-related costs and expenses. This amount is in addition to the more than $33 million in refunds the bank has already issued. The bank did not admit any wrongdoing and maintained that it did not breach the terms of any GAP agreements or otherwise fail to pay early payoff GAP refunds.

    Courts Class Action Settlement Auto Finance Guaranteed Asset Protection Fees Consumer Finance State Issues

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