|National Mortgage Servicing Company Will Pay $63 Million to Settle FTC, CFPB Charges
Green Tree Servicing Allegedly Deceived Homeowners, Many of Whom Were Already in Financial Distress
A national mortgage servicing company will pay $63 million to resolve Federal Trade Commission and Consumer Financial Protection Bureau charges that it harmed homeowners with illegal loan servicing and debt collection practices.
The FTC and CFPB allege that Green Tree Servicing LLC made illegal and abusive debt collection calls to consumers, misrepresented the amounts people owed, and failed to honor loan modification agreements between consumers and their prior servicers, among other charges.
Under the proposed settlement, Green Tree will pay $48 million to affected consumers and a $15 million civil penalty. The company also will stop its alleged illegal practices, create a home preservation plan for some distressed homeowners, and take rigorous steps to ensure that it collects the correct amounts from consumers.
“It’s against the law for a loan servicer to lie about the debts people owe, or threaten and harass people about their debts,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working together, the FTC and CFPB are holding Green Tree responsible for mistreating homeowners, including people in financial distress.”
Green Tree has become the servicer for a substantial number of consumers who were behind on their mortgage payments at the time their loans were transferred to Green Tree. Because homeowners cannot choose their servicer, they are locked into a relationship with the company for as long as it services their loans.
Illegal Debt Collection Practices
According to the FTC and the CFPB, Green Tree’s collectors called consumers who were late on mortgage payments many times per day, including at 5 a.m. or 11 p.m., or at their workplace, every day, week after week, and left many voicemails on the same day. They also unlawfully threatened consumers with arrest or imprisonment, seizure of property, garnishment of wages, and foreclosure, and used loud and abusive language, including calling consumers “deadbeats,” mocking their illnesses and other struggles, and yelling and cursing at them. The company also allegedly revealed debts to consumers’ employers, co-workers, neighbors, and family members, and encouraged them to tell the consumers to pay the debt or help them pay it. The complaint also alleges that Green Tree took payments from some consumers’ bank accounts without their consent.
The agencies also allege that Green Tree pressured consumers to make payments via Speedpay, a third-party service that charges a $12 “convenience” fee per transaction, claiming it was the only way to pay, or that consumers had to use the service to avoid a late fee.
Mishandled Loan Modifications and Delayed Short Sale Requests
According to the complaint, in many instances, Green Tree failed to honor loan modifications that were in the process of being finalized when consumers’ loans were transferred from other servicers to Green Tree. This resulted in consumers making higher monthly payments, receiving collection calls, and even losing their homes to foreclosure. Green Tree also allegedly misled consumers about their loss mitigation options. The company told some consumers who were behind on their mortgages that they needed to make a payment to be considered for a loan modification, even for programs that prohibited the company from requiring up-front payments. In addition, Green Tree took up to six months to respond to consumers’ short sale requests despite telling them it would respond much more quickly. These delays caused consumers to lose potential buyers, miss other loss mitigation options, and face foreclosures they could have avoided.
Misrepresented Account Status to Consumers and Credit Reporting Agencies
According to the complaint, Green Tree misrepresented the amounts consumers owed or the terms of their loans. This included telling consumers they owed fees they did not owe, or that they had to make higher monthly payments than their mortgage contracts required. The company often knew or had reason to believe that specific portfolios of loans it acquired from other servicers contained unreliable or missing information. In many instances, it should have known that consumers had loan modifications from prior servicers and therefore owed lower amounts. And when consumers disputed the amounts owed or terms of their loans, Green Tree failed to investigate the disputes before continuing collections.
Green Tree also allegedly furnished consumers’ credit information to consumer reporting agencies when it knew, or had reasonable cause to believe, that the information was inaccurate, and failed to correct the information after determining that it was incomplete or inaccurate – often when consumers told Green Tree about it.
Proposed Settlement Order
In addition to the $63 million in monetary payments, the proposed settlement order includes provisions that require Green Tree to:
The proposed order also prohibits Green Tree from making material misrepresentations about loans, processing procedures, payment methods, and fees, from taking unauthorized withdrawals from consumer accounts, and from violating the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act.
The Commission vote authorizing the staff to file the complaint and proposed stipulated order was 5-0. The FTC filed the complaint and proposed stipulated order in the U.S. District Court for the District of Minnesota.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when approved and signed by the District Court judge.
|SUBSCRIBER SERVICES: Manage Preferences | Unsubscribe | HelpThis is a free service provided by the Federal Trade Commission.|
Areas & Topics
Our Office LocationEdelman, Combs, Latturner, & Goodwin, LLC
20 South Clark Street
Chicago, IL 60603
E-mail Us | Chicago Law Office
Please contact us if Pushpin Holdings is suing you.
Please contact us if you have received collection letters seeking to collect a National Collegiate Student Loan Trust debt.
A.G. Schneiderman Obtains Settlement With Fourth Debt Buyer Vacating $1.7m In Improperly Obtained Debt-Collection Actions
Asta Funding, Inc. to Vacate Over 300 Judgments Totaling Over $1.7 Million; Reform Practices; Pay $100,000 in Penalties and Costs
Schneiderman: My Office Will Hold Debt Collectors That Prey Upon New York Consumers Accountable
NEW YORK – Attorney General Eric T. Schneiderman today announced that his office has obtained a settlement from debt buyer Asta Funding, Inc. (“Asta”) for bringing improper debt collection actions against hundreds of New York consumers. For years, Asta sued New York consumers and obtained uncontested default judgments against consumers who failed to respond to the lawsuits, even though the underlying claims were untimely under New York law. Under the settlement, Asta will move to vacate more than 300 improperly obtained judgments totaling more than $1.7 million. Asta will also reform its debt collection practices and pay civil penalties and costs in the amount of $100,000.
“Filing lawsuits on debts that have surpassed the statute of limitations is an abuse of the court system and hurts New Yorkers,” said Attorney General Schneiderman. “My office will continue to hold debt collectors and lenders accountable, so that New Yorkers can keep more of their hard-earned money where it belongs – in their pockets.”
Asta is a debt buyer that purchases unpaid consumer debts such as credit card debts from the original creditor or from other debt buyers at deeply discounted prices. Asta’s subsidiaries, which include Palisades Collection, LLC and Palisades Acquisition XVI, LLC, then attempt to collect on the debt.
It is unlawful for a debt collector to bring suit against a consumer when the claims are outside of the applicable statute of limitations. Under New York law, for an action to be timely filed it must be commenced not only within New York’s statute of limitations, but also within the statute of limitations of the state where the cause of action accrued, if other than New York. In debt collection actions, a cause of action accrues where the original creditor resides. For example, while New York’s statute of limitations to collect on a debt is generally six years, if the original creditor was located in Delaware, which has a three-year statute of limitations, the shorter statute of limitations would govern the action.
The Attorney General’s investigation found that despite the clear requirements of New York law, Asta brought debt collection actions that were untimely under the statutes of limitations where the causes of action accrued. Because most consumers fail to respond when they are sued by a debt collector, Asta obtained default judgments in its favor based on these time-barred claims.
In addition to seeking to vacate more than 300 improperly obtained judgments and paying $100,000 in civil penalties and costs, Asta has agreed to several important reforms of its current practices in New York. These include:
- Disclosing in written or oral communications that a debt is outside the statute of limitations and that the company will not sue to collect on the debt.
- Disclosing in written or oral communications that a debt is outside the date for reporting the debt provided for by the federal Fair Credit Reporting Act and that because of the age of the debt the company will not report the debt to any credit reporting agency.
- Alleging certain information relevant to the statute of limitations in any debt collection complaint, such as the name of the original creditor, and the date of the consumer’s last payment on the debt.
In addition to filing time-barred debt collection actions, from 2006 through 2012, contrary to New York law, Asta permitted its employees to sign affidavits outside the presence of a notary and then deliver them to an employee who would notarize the affidavits in bulk. The settlement requires Asta to ensure that affidavits are notarized in a manner consistent with the requirements of New York law, including that the affidavit or other sworn statement is signed in the presence of a licensed notary.
This settlement is a part of the Attorney General’s continuing efforts to combat unlawful and abusive debt collection activity. In May 2014 and January 2015, Attorney General Schneiderman obtained settlements from three major debt buyers, Portfolio Recovery Associates, Sherman Financial Group, and Encore Capital Group, who filed time-barred debt collection cases. Those settlements resulted in the vacature of more than 7,500 improperly obtained judgments estimated at more than $34 million. More information on those settlements is available here and here.
In addition, in September 2014, New York’s Court System adopted a comprehensive set of reforms related to consumer debt collection actions that incorporate many of the recommendations of the Attorney General’s Office. More information on those reforms is available here.
Consumers facing default judgments arising from debt collection actions brought by Asta or its subsidiaries who believe that the default judgment was improperly obtained because the claim was time-barred should contact the Attorney General’s Office within 60 days. Such judgments may be eligible for vacature pursuant to the settlement.
This case was handled by Assistant Attorney General Melissa O’Neill and Bureau Chief Jane M. Azia, both in the Consumer Frauds and Protection Bureau, and Executive Deputy Attorney General of Economic Justice Karla G. Sanchez.
The Federal Trade Commission and the Illinois Attorney General’s Office have obtained a court order temporarily halting a fake debt collection scam located in Aurora, Illinois, a western suburb of Chicago. The defendants are charged with illegally using threats and intimidation tactics to coerce consumers to pay payday loan debts they either did not owe, or did not owe to the defendants.
The FTC’s case against K.I.P., LLC, Charles Dickey, and Chantelle Dickey is the agency’s seventh ‘phantom’ debt collector matter.
“This company scared and tricked people into paying debts they didn’t owe,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working with terrific partners like the Illinois Attorney General, we will keep going after phantom debt scams like this one and shutting them down.”
“The defendants have threatened and intimidated their way into stealing hundreds of thousands of dollars from unsuspecting people all across the country,” Illinois Attorney General Lisa Madigan said. “Between our two offices, we have hundreds of complaints. It is clear they must be stopped.”
According to the complaint, since at least 2010, the defendants used a host of business names to target consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts that they either did not owe or that the defendants had no authority to collect.
Often armed with sensitive financial information, the defendants would call consumers and demand immediate payment for payday loans that were supposedly delinquent. To pressure consumers to pay, the defendants threatened that they would:
- Garnish consumers’ wages;
- Suspend or revoke their drivers’ licenses;
- Have them arrested or imprisoned; or
- File a lawsuit against them.
In response to the defendants’ repeated calls and alleged threats, many consumers paid the debts, even though they may not have owed them, because they believed the defendants would follow through on their threats or they simply wanted to end the harassing phone calls.
The complaint also charges the defendants with failing to provide consumers with a notice containing: 1) the amount of the debt; 2) the name of the creditor to whom the debt is owed; 3) a statement that unless the consumer disputes the debt, it will be assumed to be valid; 4) a statement that if the consumer does dispute the debt in writing, the defendants will verify the debt is correct; and 5) a statement that upon the consumer’s written request, the defendants will provide the consumer with the name and address of the original creditor if different from the current creditor.
Finally, the complaint charges that the defendants: called consumers at work when they knew such calls were prohibited by consumers’ employers; harassed and abused consumers; used obscene or profane language; and called consumers repeatedly with the intent of annoying or abusing them.
The complaint also alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Collection Agency Act, and that the defendants are not licensed debt collectors as required by Illinois law.
Defendants named in the case include: K.I.P., LLC; Charles Dickey, individually and as an owner, member, or managing member of K.I.P., LLC, and also doing business as (d/b/a) Ezell Williams and Associates, Corp.; Ezell Williams, LLC; Excel Receivables, Corp.; Second Chance Financial Credit, Corp.; Second Chance Financial, LLC; Payday Loan Recovery Group, LLC; Payday Loan Recovery Group; Payday Loan Recovery; International Recovery Services, LLC; International Recovery Services; and D&R Recovery. The complaint also names Chantelle Dickey, also known as Chantelle Rudd and Chantelle Williams, as an individual and as a manager of K.I.P.
The FTC and the Illinois Attorney General’s Office appreciate the Aurora Police Department, North Aurora Police Department, Better Business Bureau of Chicago and Northern Illinois, and the U.S. Postal Inspection Service Chicago Division for their valuable assistance with this matter.
For consumer information about your rights under the Fair Debt Collection Practices Act, see Facing Debt Collection? Know Your Rights. For consumer tips on dealing with phantom debt collectors, see Fake Debt Collectors.
The Commission vote approving the filing of the joint complaint was 5-0. It was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division. The court issued a temporary restraining order halting the charged practices, freezing the defendants’ assets, and appointing a temporary receiver to take control of the business.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
Stand up to fake debt collectors
The caller is irate, intimidating and — despite the foul language — sounds convincing. He says you must make good on a payday loanor your wages will be garnished. If you applied for a payday loan before, you might start questioning your memory: “Did I miss a payment? The caller has my information, so this must be legit…”
The last thing you need is a short paycheck — especially if you’re already in a bind. So you pay. Thing is, you don’t owe them a dime. It’s a scam.
The FTC’s and the Illinois Attorney General’s complaint against K.I.P., LLC, Charles Dickey and Chantelle Dickey is the latest effort to stop scammers from trying to collect fake debts from consumers. According to the complaint, callers threatened to garnish wages, and they offered to accept, or “settle the debt,” for significantly less than the amount allegedly owed. In addition, the caller didn’t give the person any proof of the debt — even when asked. But the calls were so convincing that many consumers actually made payments — even though they didn’t owe.
Here are a few tips for standing up to these scammers:
- Ask the caller for his name, company, street address, and telephone number. Tell the caller you won’t discuss any debt until you get a written “validation notice.” If the caller refuses, don’t pay.
- Put your request in writing. The Fair Debt Collection Practices Act (FDCPA) requires any debt collector to stop calling if you ask in writing. Of course, if the debt is real, sending such a letter does not get rid of the debt, but it should stop the contact.
- Don’t give or confirm any personal, financial, or other sensitive information.
- Contact your creditor. If a debt is legitimate – but you think the collector isn’t — contact the company to which you owe the money.
- Report the call. File a complaint with the FTC and yourstate Attorney General’s office with information about suspicious callers.
from Credit & Collection News (industry publication)
Business leaders across the country are warning of the dangers in massive student loan debt, which has overtaken credit card debt as the largest debt in the nation. New York State and federal lawmakers have been inventing new loan forgiveness programs, but for many it’s not enough. Some programs fail to target the heart of the issue, and others don’t reach back to help those who already are suffering, they just aim to help protect those who will graduate in the future. The National Foundation for Credit Counseling is launching a program which aims at providing full-service counseling for college students and grads struggling under the weight of massive loans. But the Consumer Credit Counseling Service of Buffalo — which is part of the national network — is already offering those services to debt-strapped western New Yorkers. Councelor Noelle Carter says if an individual has trouble paying back a student loan, chances are they’re having trouble with all of their finances. “They may have taken out credit card debt to help supplement their living costs, and they may also not be investing in other assets,” Carter noted, saying that doesn’t contribute to the economy. “They may not be purchasing vehicles, they may not be purchasing homes. They are still living at home with their parents.” Over 43,000,000 Americans are working to pay back some form of student debt, and more than one fourth of those borrowers are delinquent or in default on their loans. “[This] is critical,” Carter said. “This student loan debt is probably going to be our next financial crisis if we don’t do something about it.”
Study finds high default rates in payday lending
By Lydia Wheeler – 03/31/15 05:52 PM EDT
In studying payday loans in North Dakota, the Center for Responsible Lending found that nearly half of all borrowers default on a loan within their first two years of borrowing.
The number — 46 percent — is attributed to borrowers who took out multiple payday loans within that two-year period or renewed just one loan.
The CRL’s study, released Tuesday, goes on to say that of the 46 percent, half defaulted within the first two payday loans they borrowed. This, said Senior Policy Researcher Susanna Montezemolo, means borrowers are getting into trouble right away.
The report comes about a week after the Consumer Financial Protection Bureau released its framework for payday loan regulation, which proposed letting lenders chose between two different sets of rules. One would prevent the borrower from getting stuck in a debt trap by forcing lenders to determine a borrower’s ability to repay before issuing a loan. The other would protect lenders after they’ve taken out a payday loan from getting trapped in fees and being unable to pay off the loan if they defaulted.
Montezemolo said the CRL’s study supports arguments that the ability to repay standard loans should to be required for every payday loan.
“This report shows a high default rate on payday loans even though lenders are first in line to be paid — a clear sign that a borrower is unable to escape the debt trap once lured in by an initial payday loan,” she said.
The CRL used data from North Dakota because it has a database that tracks each borrower in the state.
“We have no reason to think North Dakota is any different from any other state that doesn’t regulate payday lenders,” Montezemolo said.
Not only do payment checks bounce, which is known as a visible default, the CRL said there are invisible ways borrowers can default on a payday loan. They occur when the check written to the payday lender goes through but results in an overdraft or non-sufficient funds fee. The CRL said invisible defaults, which one-third of all borrowers experience, mask the true default rate and make triple-digit interest rate loans even more expensive for consumers.
Please contact us if Med-1 Solutions sued or attempted to collect money from you after October 18, 2011.