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District court approves an $8.8 million TCPA class action settlement with an inmate telephone company
On September 24, the U.S. District Court for the Central District of California approved an $8.8 million class action settlement between consumers and an inmate telephone company. The settlement resolves allegations that the company violated the TCPA by playing a separate prerecorded “Notification Call” directing the receiving party to provide billing information for the inmate’s collect calls without obtaining the receiving party’s prior consent or providing the receiving party with an opt out mechanism for future calls. Under the terms of the settlement, the company will pay almost $175 to each class member and will change its practices to include both an interactive-voice/key activated opt-out mechanism and a toll-free number that the receiving party may use to opt-out of all future notification calls.
FTC announces settlements with website operators over the sale of fake documents allegedly used for fraud and identity theft
On September 18, the FTC announced three proposed settlements with the operators of websites who allegedly violated the FTC Act’s prohibition against unfair practices by selling fake financial documents used to facilitate identity theft and other frauds, including loan and tax fraud. As previously covered in InfoBytes, identity theft was the second largest category of consumer complaints reported in 2017 according to the FTC. The FTC brought charges against the first defendant, alleging the defendant engaged in the sale of fake pay stubs, bank statements, and profit-and-loss statements, as well as providing a product that allowed customers to edit existing (and authentic) bank statements. The second defendant’s charges include the alleged sale of fake pay stubs, auto insurance cards, and utility and cable bills, while the allegations against the third defendant also include the sale of fake tax forms, bank statements, and verifications of employment. While the defendants’ websites claimed that the fake documents were sold for “‘novelty’ and ‘entertainment’ purposes,” the FTC asserts that the defendants “failed to clearly and prominently mark such documents as being for such purposes and did not state on the documents themselves that they were fake.”
Under the terms of the proposed settlement agreements (see here, here, and here), monetary judgments are imposed against the defendants, who also are permanently prohibited from advertising, marketing, or selling similar fake documents.
FTC and NYAG settle with debt collectors who falsely threatened consumers
On September 21, the FTC announced settlements with multiple New York debt collection operations and their principals (defendants) for unlawful debt collection practices. The settlements are a result of 2015 joint lawsuits by the FTC and the New York Attorney General, alleging the defendants unlawfully used threats and abusive language, including false threats that consumers would be arrested, to collect more than $45 million in supposed debts (previously covered by InfoBytes here). The settlement orders ban the defendants from the business of debt collection and prohibit the defendants from (i) misrepresenting information related to financial products and services; (ii) disclosing, using, or benefitting from the consumer information obtained through the course of the debt collection activities; and (iii) failing to disclose of such personal information properly. The two orders (located here and here) impose a $22.5 million judgment against one set of defendants, and a judgment of $4.4 million against other defendants. The judgments are suspended as to some of the defendants due to inability to pay.
DOJ settles with apartment owner for alleged SCRA violations
On September 11, the Department of Justice announced a settlement with a Nebraska apartment complex owner resolving allegations that it violated the Servicemembers Civil Relief Act (SCRA) by unlawfully charging lease termination fees for 65 servicemembers. The complaint, which was filed on the same day as the settlement, alleges that between January 2012 and June 2017, the apartment complex owner imposed early lease termination fees, ranging from $78 to almost $1,500, on servicemembers who sought termination due to qualifying military orders under the SCRA. The settlement requires the apartment complex owner, among other things, to (i) pay more than $76,000 in damages to the 65 identified servicemembers; (ii) pay a $20,000 civil money penalty, and (iii) develop policies and procedures related to SCRA lease terminations.
Court approves final class action settlement; previously ruled that extended overdrawn balance charge fees are “interest” under National Bank Act
On August 31, the U.S. District Court for the Southern District of California granted final approval to a class action settlement, resolving a suit alleging that a national bank’s overdraft fees exceeded the maximum interest rate permitted by the National Bank Act (NBA). According to the order, the settlement ends a putative class action concerning the bank’s practice of charging a $35 “extended overdrawn balance charge” fee (EOBCs) on deposit accounts that remained overdrawn for more than five days when funds were advanced to honor an overdrawn check. Class members argued that the fee amounted to interest and—when taken into account as a percentage of an account holder’s negative balance—exceeded the NBA’s allowable interest rate. The bank countered, stating that “EOBCs were not ‘interest’ and therefore cannot trigger the NBA.” A 2016 order denying the bank’s motion to dismiss, which departed from several other district courts on this issue, found that “covering an overdraft check is an ‘extension of credit’” and therefore overdraft fees can be considered interest under the NBA. The bank appealed the decision to the 9th Circuit in April 2017, but reached a settlement last October with class members.
Under the terms of the approved settlement, the bank will refrain from charging extended overdraft fees for five years—retroactive to December 31, 2017—unless the U.S. Supreme Court “expressly holds that EOBCs or their equivalent do not constitute interest under the NBA.” The bank also will provide $37.5 million in relief to certain class members who paid at least one EOBC and were not provided a refund or a charge-off, and will provide at least $29.1 million in debt reduction for class members whose overdrawn accounts were closed by the bank while they still had an outstanding balance as a result of one or more EOBCs applied during the class period. The bank also will pay attorneys’ fees.
Court approves $17 million class action settlement with mortgage company and real estate service companies for alleged RESPA violations
On August 27, the U.S. District Court for the Central District of California approved a class action settlement agreement resolving allegations against a national mortgage company and a real estate services family of companies (defendants) for allegedly arranging kickbacks for unlawful referrals of title services in violation of RESPA. As previously covered by InfoBytes, the 2015 complaint accused the defendants of violating RESPA by allegedly facilitating the exchange of unlawful referral fees and kickbacks through an affiliated business arrangement, while also directing various banks to refer title insurance and other settlement services to a subsidiary in the family of real estate services companies without informing customers of the relationship between the entities. In a stipulation of settlement filed in 2017 alongside a motion for preliminary approval, defendants indicated that they continued “to deny each and all of the claims and contentions alleged in the [a]ction . . . [but] have concluded that the further conduct of the [a]ction against them would be protracted and expensive.” The stipulation further noted that “substantial amounts of time, energy and resources have been and, unless this [s]ettlement is made, will continue to be devoted to the defense of the claims asserted in the [a]ction.”
The approved settlement class encompasses more than 32,000 transactions related to borrowers who closed on mortgage loans originated by the mortgage company between approximately November 2014 through November 2015, and who paid any title, escrow or closing related charges to the real estate services companies. The defendants will pay $17 million into a settlement fund, which covers payment to class members as well as attorney’s fees and costs.
Court approves $8.5 million class action settlement with global money service for alleged TCPA violations
On August 31, the U.S. District Court for the Northern District of Illinois approved an $8.5 million class action settlement resolving allegations that a global money service violated the Telephone Consumer Protection Act (TCPA) by sending unsolicited text messages to class members. While the court approved the full settlement amount, it only awarded 5 percent of the fund to the class counsel, as opposed to the 35 percent requested, noting counsel’s “disquieting conduct” related to a class objector and lack of billing records supporting the “substantial work” counsel claimed to have performed on the case (reportedly more than 2.5 times the hours spent by defense counsel). Of the $8.5 million required to be paid by the company, the court modified the agreement to provide class member claims over $7.5 million. The court determined that the settlement “provides fair actual cash value to the class,” as the company had potential defenses to the pending litigation; there was legal uncertainty as to whether the telecommunications equipment used by the company was actually an “automatic telephone dialing system” under the TCPA; and the inherent expense in litigation and proceeding to trial for the class.
Court preliminarily approves $30 million settlement for post-payment interest charges on FHA mortgages
On August 22, the U.S. District Court for the Northern District of California preliminarily approved a $30 million settlement resolving allegations that a national bank improperly collected post-payment interest on FHA-insured mortgages but did not use the FHA-approved form to provide the disclosures to consumers before doing so. The settlement covers a nationwide class of borrowers who, between June 1996 and January 2015, obtained an FHA-insured mortgage loan. The settlement requires the bank to pay $30 million.
Court approves 1.8 million FCRA class action settlement with national bank
On August 16, the U.S. District Court for the Northern District of California approved a $1.8 million class action settlement resolving allegations that a national bank’s soft credit report inquiries were not permitted under the Fair Credit Reporting Act (FCRA). In 2015, a consumer filed the class action complaint alleging that the bank pulled his credit information without consent following a bankruptcy. The consumer alleged that because his debts to the bank had been discharged, the bank did not have a “permissible purpose” to pull the credit information. The approved settlement covers 114,512 claimants, who state their credit reports were accessed without permission by the bank, and grants each claimant $4.06. The settlement also requires the bank to pay attorneys’ fees and litigation costs for the plaintiff.
Court approves $115 million settlement for health insurer data breach
On August 15, the U.S. District Court for the Northern District of California issued final approval for a $115 million class action settlement to resolve claims stemming from a large health insurer’s 2015 data breach. As previously covered by InfoBytes, in June 2017, the health insurer and plaintiffs came to the $115 million agreement regarding the company’s 2015 data breach, exposing consumers’ and employees’ social security numbers, birthdays, and other personal data to hackers. The settlement agreement provides for (i) two years of credit monitoring; (ii) reimbursement of out-of-pocket costs related to the breach; and (iii) alternative cash payment for credit monitoring services already obtained. While the settlement agreement was challenged after the initial deal was struck, the court noted that the objectors “ignore that the [s]ettlement provides the class with a timely, certain, and meaningful recovery.” Moreover, the court notes the objectors do not account for the “strong message” it sends to the health insurer, stating, “a settlement does not need to provide for all possible recoverable damages to deter wrongdoing.”