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Credit unions to pay $4 million in GAP fee refunds
On January 4, the Colorado attorney general announced settlements with two credit unions that will pay a combined $4 million in refunds to borrowers in the state who were entitled to “guaranteed automobile protection” (GAP) fee refunds. An investigation conducted by the Consumer Protection Section of the Colorado Department of Law found that the credit unions historically failed to refund unearned GAP fees owed to consumers. According to the state, the credit unions act as creditors by purchasing retail installment sales contracts from auto dealers that include GAP purchased by Colorado consumers. The state explained in its announcement that borrowers pay the full GAP fee when they purchase a car (the fee is typically only earned gradually over the loan’s lifetime). However, should a borrower prepay the loan prior to maturity or the car is repossessed and sold at auction before the loan is paid off, Colorado law requires lenders to refund the unearned portion of the GAP fee to the borrower, the state said.
The assurances of discontinuance (see here and here) apply to all consumer credit transactions entered into with consumers in the state related to any alleged unfair conduct committed by the credit unions related to GAP fee refund practices. In additional to paying consumer remediation and $100,000 each to the state, the credit unions also agreed to alter their business practices to ensure that applicable refunds will be provided to consumers going forward.
District Court gives preliminary approval to $11.5 million FCRA settlement
On January 6, the U.S. District Court for the Northern District of Georgia granted preliminary approval of a $11.5 million settlement in a class action FCRA suit, resolving allegations that a credit reporting agency (CRA) reported inaccurate or incomplete criminal and civil records. According to the plaintiffs’ motion for preliminary approval of the proposed settlement and memorandum in support, the defendant violated the FCRA by attributing criminal records to consumers that did not belong to them. The plaintiffs further alleged that “misattribution resulted from [the defendant’s] unreasonable procedures related to its using or failure to use certain identifying information in its matching algorithm.” In addition, the plaintiffs claimed that the defendant failed to report favorable dispositions in landlord-tenant records. The plaintiffs also alleged that the defendant “did not obtain complete and up-to-date public records from the source, instead relying on old or incomplete data obtained from its vendor(s) or retrieved through automated processes.” If final approval of the settlement is granted, attorney fees will account for about a third of the $11.5 million settlement amount. The estimated number of people who could benefit from the settlement is approximately 90,000, with awards for this group ranging from $40 to $800. The defendant will also be obliged under the settlement to provide data needed to identify members of the class. Further, class members whose names were misreported as tied to felonies or sex offenses, or who disputed their criminal records, will be paid higher payments than those linked to misdemeanors, lower-level offenses, or eviction records.
DOJ says court will oversee social media company’s housing ads into 2026
On January 9, the DOJ informed a New York federal judge that it had reached a follow-up agreement with a global social media company to ensure its compliance with a June 2022 settlement that required the company to stop using a tool that allowed advertisers to exclude certain users from seeing housing ads based on their sex and estimated race/ethnicity. Explaining that the tool violated the Fair Housing Act, the letter said the company agreed to allow the tool to expire and agreed to build a system to reduce variances in its housing ad delivery system related to sex and estimated race/ethnicity. A follow-up agreement reached between the parties on compliance targets established that the company will be subject to court oversight and regular compliance review through June 27, 2026. The company released a statement following the settlement announcing it is making changes “in part to address feedback we’ve heard from civil rights groups, policymakers and regulators about how our ad system delivers certain categories of personalized ads, especially when it comes to fairness.” The company further noted that “while HUD raised concerns about personalized housing ads specifically, we also plan to use this method for ads related to employment and credit. Discrimination in housing, employment and credit is a deep-rooted problem with a long history in the US, and we are committed to broadening opportunities for marginalized communities in these spaces and others.”
District Court approves $11 million data breach settlement
On January 4, the U.S. District Court for the Northern District of Texas granted final approval of an $11 million class action settlement resolving allegations related to a February 2021 data breach that compromised more than 4.3 million customers’ personally identifiable information, including names, Social Security numbers, driver’s license numbers, dates of birth, and username/password information. According to plaintiffs’ amended complaint, the defendant insurance software providers failed to notify affected individuals about the data breach until on or after May 10, 2021, despite commencing an investigation in March. Plaintiffs maintained that the defendants’ alleged failure to comply with FTC cybersecurity guidelines and industry data protection standards put at risk their financial and personal records, and said they now face years of constant surveillance to prevent potential identity theft and fraud. Under the terms of the settlement (see also plaintiffs’ memorandum of law in support of the motion for final approval), class members will each receive up to $5,000 for out-of-pocket expenses, including up to eight hours of lost time at $25/hour, as well as 12 months of financial fraud protection. Members of a California subclass will receive additional benefits of between $100 and $300 each. The defendants are also responsible for paying each named plaintiff a $2,000 service award and must pay over $3 million in attorney fees, costs, and expenses.
District Court preliminarily approves data breach suit
On January 9, the U.S. District Court for the District of New Mexico granted preliminary approval of a class action settlement in a data breach suit that allegedly compromised approximately 191,000 individuals’ personally identifiable information (PII). According to the plaintiffs’ motion, the class alleged that their PII and personal health information were compromised when cybercriminals breached the defendant’s systems. If granted final approval, the settlement class would consist of four categories of relief: (i) reimbursement for lost time (up to four hours at $15 per hour) and out-of-pocket expenses up to $500; (ii) reimbursement for extraordinary losses up to $3,500; (iii) two years’ free credit monitoring services; and (iv) equitable relief in the form of security improvements to the defendant’s system.
District Court grants $11.9 million settlement in ATM fees suit
In December, the U.S. District Court for the District of New Jersey granted preliminary approval of a $11.9 million settlement in a class action suit resolving allegations pertaining to a defendant national bank’s out-of-network ATM fees. According to the plaintiff’s motion, the plaintiffs challenged a fee assessed by the defendant “when its accountholders check their account balance at a [an out-of-network] ATM, referred to herein as an ‘Out of Network ATM Balance Inquiry Fee’ or ‘OON ATM Balance Inquiry Fee.’” The plaintiffs alleged that such fees on balance inquiries, when combined with fees assessed by the bank and by the out-of-network ATM owner, resulted in three total fees on a single cash withdrawal at an out of network ATM, and violated the terms of the defendant’s account agreement.
On July 19, 2023 the court granted final approval to the settlement.
OFAC settles with Danish company for routing prohibited financial transactions though a U.S. bank
On December 30, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a more than $4.3 million settlement with a multinational Danish manufacturer to resolve allegations that its wholly owned United Arab Emirates (UAE)-based subsidiary directed customers in Iran, Syria, and Sudan to make payments to its bank account at the UAE branch of a U.S. financial institution. According to OFAC’s enforcement release, between November 2013 and August 2017, the subsidiary sold products to customers in Sudan, Syria, and Iran. Customers were instructed to remit payments to at least three accounts at banks located in the UAE, including the parent company’s U.S. branch account. OFAC further contended that the subsidiary used third-party payers to make five transfers (disguising the originator or beneficiary of the transactions) from its U.S. branch account to parties in Syria and Iran, which prevented the bank’s transactional screen filters from stopping the payments. The total value of all the transfers was roughly $16,959,683, OFAC said, claiming that by causing a U.S. financial institution to facilitate prohibited financial transactions and export financial services, the parent company violated the Iranian, Syrian, and Sudanese sanctions regulations.
While OFAC found no evidence that the parent company willfully engaged third-party payers to evade sanctions, it determined that the subsidiary “was aware since at least 2011 that using a U.S. financial institution to send or receive payments related to sanctioned jurisdictions could be prohibited.” Moreover, the subsidiary allegedly received communications from the parent company and various financial institutions regarding concerns flagged in its banking activity but continued to use the U.S. branch account to collect payments from customers in sanctioned jurisdictions. These alleged violations, OFAC stated, occurred primarily due to deficiencies in the parent company’s global sanctions compliance program.
OFAC noted that while the parent company disclosed the alleged violations, the agency was already in possession of the relevant information and therefore the submission did not qualify as a voluntary self-disclosure. However, OFAC considered various mitigating factors, including that the parent company had not received a penalty notice from OFAC in the preceding five years, and the parent company took quick action to determine the root causes of the alleged conduct and undertook significant remedial measures to prevent future violations.
Providing context for the settlement, OFAC stated that the “enforcement action highlights the risks to multinational companies, including to non-U.S. entities, that involve the U.S. financial system in commercial activity involving an OFAC- sanctioned country, region, or person,” and emphasized that “[c]ommercial activity that might not otherwise violate OFAC regulations—such as the sale of non-U.S. goods by a non-U.S. person to an entity in an OFAC-sanctioned country—can nonetheless cause a violation when the financial transactions related to that activity are processed through or involve U.S. financial institutions.”
National bank to pay $2 million in mortgage fee violation class action
On December 19, the U.S. District Court for the Central District of California granted final approval of a settlement in a $2 million class action resolving allegations that a national bank violated California’s Rosenthal Fair Debt Collection Practices Act (RFDCPA) and Unfair Competition Law (UCL). According to the order for preliminary approval, the plaintiff class alleged that the bank improperly charged and collected transaction fees when processing mortgage payments. The district court certified the class, which included “all persons who have or had a California address, and at any time between June 1, 2016 and the date of the Court’s order preliminarily approving the settlement, paid at least one transaction fee to [the defendant] for making a payment on a residential mortgage loan serviced by [the defendant] by telephone, IVR, or the internet.” The district court determined that the settlement agreement was “reasonable and adequate.” The two class representatives who filed the suit were awarded $1,500 each, and their attorneys were awarded $499,000 in fees.
District Court approves $2.8 million settlement in FDCPA convenience fee class action
On December 22, the U.S. District Court for the Southern District of Florida granted preliminary approval of a $2.8 million settlement in an FDCPA class-action suit resolving allegations that convenience fees were charged when consumers made payments on their mortgages over the phone or online. According to the suit, the plaintiffs claimed the defendant did not charge processing fees if borrowers made payments by check or signed up for automatic monthly debits from their bank accounts. The plaintiffs further argued that the processing fees were “illegal and improper because neither the mortgages themselves nor applicable statutes authorize such fees.” The parties agreed to mediation in April 2022, and a motion for preliminary approval of a settlement was filed in August. A coalition of state attorneys general from 32 states and the District of Columbia, led by the New York AG filed an amicus brief in the district court opposing the original proposed $13 million settlement in the suit (covered previously by InfoBytes here). The AGs outlined concerns with the proposed settlement, including that (i) the relief provided to class members violates various state laws, and that the defendant seeks to ratify fees in an “unwritten, mass amendment” that violates state laws and regulations; (ii) class members only receive an “inadequate” one-time payment, while the defendant may continue to charge excessive fees for the life of the loan; and (iii) low- and moderate-income borrowers are not treated equitably under the proposed settlement. Under the terms of the new settlement, members of the class who do not opt out of the settlement will receive a share of the $2.8 million. The settlement also reduces the fees class members will have to pay when making payments online or via the telephone for the next two years. The defendant also agreed to add additional disclosures to its website to increase borrower awareness of alternative payment methods that could have lower fees or no fees. Defendant’s representatives will also receive additional training to ensure they provide additional information and disclosures about convenience fees when speaking with customers.
On June 16, the court granted final approval of the settlement.
District Court preliminarily approves lending discrimination settlement
On December 15, the U.S. District Court for the Northern District of California preliminarily approved a $480,000 class action settlement concerning whether an online lender allegedly denied consumers’ applications based on their immigration status. Plaintiffs filed a putative class action against the defendants, alleging the lender denied their loan applications based on one of the plaintiff’s Deferred Action for Childhood Arrivals (DACA) status and the other plaintiff’s status as a conditional permanent resident (CPR). Plaintiffs claimed that these practices constituted unlawful discrimination and “alienage discrimination” in violation of federal law and California state law. Plaintiffs also alleged that the defendants violated the FCRA by accessing their credit reports without a permissible purpose. (Covered by InfoBytes here.) Under the terms of the preliminarily approved settlement, the defendants would be required to pay $155,000 into a settlement fund, as well as up to $300,000 in attorneys’ fees and $25,000 in administrative costs. The defendants have also agreed to change their lending policies to ensure DACA and CPR applicants are evaluated for loan eligibility based on the same terms as U.S. citizens.
The district court noted, however, that the proposed settlement includes a “clear sailing arrangement,” which provides that the defendants will not oppose plaintiffs’ motion for attorneys’ fees and costs provided the requested amount does not exceed $300,000. Referring to an opinion issued by the U.S. Court of Appeals for the Ninth Circuit in which the appellate court warned that clear sailing arrangements are “important warning signs of collusion” because they show an increased “likelihood that class counsel will have bargained away something of value to the class,” the district court explained that it intends to “carefully scrutinize the circumstances and determine what attorneys’ fee awards is appropriate in this case.”