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    CFPB Fines Western Union, Black Knight Affiliates $38 Million

    Tuesday, July 28th, 2015

    CFPB Takes Action Against Mortgage Payment Company And Servicer For Deceptive Ads

    Consumers Deceived by “Equity Accelerator” Claims to Receive $33.4 Million

    Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) took action today against Paymap Inc. and LoanCare, LLC for deceiving consumers with advertisements for a mortgage payment program that promised tens of thousands of dollars in interest savings from more frequent mortgage payments. Under the terms of the orders announced today, Paymap will return $33.4 million in fees to consumers and pay a $5 million civil penalty to the CFPB, and LoanCare will pay a $100,000 civil penalty.

    “Deceptive advertising has no place in the financial marketplace,” said CFPB Director Richard Cordray. “Today’s action is delivering relief for consumers deceived by Paymap and LoanCare, and sending a clear message that these practices will not be tolerated.”

    Paymap Inc. is a Colorado-based payment processing company, and LoanCare Servicing is a Virginia-based residential mortgage servicer. Together, they marketed and provided the “Equity Accelerator Program” – an electronic payment system that enables consumers to make automatic mortgage payments via electronic debits from their bank accounts. Consumers are typically charged an enrollment fee of $295 when signing up for the Equity Accelerator Program, and a transaction fee for each automatic debit that Paymap makes, typically $2.50. Since July 21, 2011, approximately 125,000 consumers enrolled in the Equity Accelerator Program and paid Paymap $33.4 million in fees.

    Paymap partnered with many mortgage servicers, including LoanCare, to market the Equity Accelerator to the mortgage servicers’ customers. LoanCare and Paymap marketed the Equity Accelerator to LoanCare’s customers in 2012 by sending them solicitations on LoanCare’s letterhead. Like the other servicers it partnered with, Paymap shared a portion of consumers’ fees with LoanCare.

    Paymap and LoanCare advertised that consumers who enrolled in the Equity Accelerator Program would have a new, biweekly payoff schedule that would lead to significant interest savings because of the more frequent payments. In fact, the Equity Accelerator Program did not make more frequent payments on consumers’ mortgages, and, Paymap’s prominent claims of tens of thousands of dollars in interest savings were made without any supporting evidence.

    The CFPB found that Paymap and LoanCare violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices. Specifically, the Bureau found that consumers were:

    • Lured with deceptive promises of savings: Paymap made claims on its website such as, “The average customer will achieve over $33,000 in interest savings” using the Equity Accelerator Program. However, Paymap had no factual basis to support this claim. Moreover, only a tiny percentage, if any, of its customers achieved that amount of interest savings.
    • Misled about when their payments would be applied: Paymap and LoanCare told consumers in their direct mail solicitations that enrolling in the Equity Accelerator Program would change the consumers’ payoff schedule to “every 2 weeks.” Although Paymap makes more frequent withdrawals from consumers’ accounts in the Equity Accelerator Program, it does not actually make more frequent payments on consumers’ mortgages. Instead, Paymap holds the collected payments in custodial accounts, and then pays consumers’ mortgages on their original monthly schedule. Consumers are charged a transaction fee with every withdrawal. Any interest savings that consumers may achieve through the Equity Accelerator Program is because they make a higher annual mortgage payment in the Program, using the same payment schedule as before enrollment.

    Enforcement Actions

    Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against companies engaging in unfair, deceptive, or abusive practices in the consumer financial marketplace.

    Under the terms of the consent order filed today, Paymap is required to:

    • Pay $33.4 million to consumers: Paymap will return $33.4 million to consumers, which represents all fees paid by every consumer who enrolled in the Equity Accelerator Program since July 21, 2011. Approximately 125,000 consumers will receive refunds.
    • Cease its unlawful advertising and marketing practices: Paymap must ensure that its marketing practices comply with federal law. Paymap is prohibited from advertising any benefits of the Equity Accelerator Program without credible evidence to support its claims, and from implying that the program will change a consumer’s regular mortgage payment schedule. Paymap must disclose that the source of any projected interest savings through the program is the higher annual mortgage payment a consumer will make in such a program.
    • Pay a $5 million civil penalty: Paymap will pay $5 million to the CFPB’s Civil Penalty Fund.

    Under the terms of the consent order filed today, LoanCare is required to:

    • Cease its unlawful advertising and marketing practices: LoanCare must ensure that its marketing practices comply with federal law. LoanCare is prohibited from advertising any benefits of the Equity Accelerator Program without credible evidence to support its claims, and from implying that the program will change a consumer’s regular mortgage payment schedule. LoanCare must disclose that the source of any projected interest savings is the higher annual mortgage payment a consumer will make in such a program.
    • Pay a $100,000 civil penalty: LoanCare will pay $100,000 to the CFPB’s Civil Penalty Fund.

    A copy of the consent order for Paymap filed today is available at:
    http://files.consumerfinance.gov/f/201507_cfpb_consent-order_paymap.pdf

    A copy of the consent order for LoanCare filed today is available at:
    http://files.consumerfinance.gov/f/201507_cfpb_consent-order_loan-care.pdf

    ###
    The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visitconsumerfinance.gov.

    Consumer Financial Protection Bureau orders Discover Bank to pay $18.5 million for illegal student loan servicing practices

    Thursday, July 23rd, 2015

    Consumer Financial Protection Bureau orders Discover Bank to pay $18.5 million for illegal student loan servicing practices

    Posted on July 22, 2015

    Discover’s illegal servicing practices affected private student loan borrowers transferred from Citibank 

    WASHINGTON, DC (July 22, 2015) — Today the Consumer Financial Protection Bureau (CFPB) took action against Discover Bank and its affiliates for illegal private student loan servicing practices. The CFPB found that Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits. The company also engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night. The CFPB’s order requires Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices.

    “Discover created student debt stress for borrowers by inflating their bills and misleading them about important benefits,” said CFPB Director Richard Cordray. “Illegal servicing and debt collection practices add insult to injury for borrowers struggling to pay back their loans. Today’s action is an important step in the Bureau’s work to clean up the student loan servicing market.”

    Discover Bank is an Illinois-based depository institution. Its student loan affiliates – The Student Loan Corporation and Discover Products, Inc. – are also charged in today’s action. Beginning in 2010, Discover expanded its private student loan portfolio by acquiring more than 800,000 accounts from Citibank. As a loan servicer, Discover is responsible for providing basic services to borrowers, including accurate periodic account statements, supplying year-end tax information, and contacting borrowers regarding overdue amounts.

    Student loans make up the nation’s second largest consumer debt market. The market has grown rapidly in the last decade. Today there are more than 40 million federal and private student loan borrowers and collectively these consumers owe more than $1.2 trillion. The market is now facing an increasing number of borrowers who are struggling to stay current on their loans. Earlier this year, the Bureau revealed that more than 8 million borrowers were in default on more than $110 billion in student loans, a problem that may be driven by breakdowns in student loan servicing. While private student loans are a small portion of the overall market, they are generally used by borrowers with high levels of debt who also have federal loans.

    Today’s action demonstrates how Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment. Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts. The CFPB concluded that the company and its affiliates violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair and deceptive acts and practices, and also the Fair Debt Collection Practices Act. Specifically, the CFPB found that the company: 

    • Overstated the minimum amount due in billing statements: Discover overstated the minimum amount due for certain borrowers who were just starting to pay off their student loan debts. The minimum payment due incorrectly included interest on loans that were still in deferment and were not required to be paid. For some borrowers this overpayment meant diverting payments from other expenses; for others it meant not paying at all because they thought they could not come close to making the full payment and instead accrued associated penalties. 
    • Misrepresented on its website the amount of student loan interest paid: The tax code permits taxpayers to deduct student loan interest paid during the year under certain conditions. Servicers are required to provide borrowers with a statement specifying how much the borrower paid in interest, if it was more than $600. Discover did not provide the Citibank private student loan borrowers with the customary tax information form it provided to its other borrowers, unless those borrowers submitted certain paperwork. For those borrowers who did not submit that additional form, their online interest statements on Discover’s website in 2011 and 2012 reflected $0.00 in interest paid. Discover did not explain that the borrowers were required to fill out a form to get the correct amount of interest they paid. This zero interest statement was likely to mislead consumers into believing that they did not qualify for the student loan tax deduction, potentially causing consumers to not seek important tax benefits.
    • Illegally called consumers early in the morning and late at night, often excessively: Discover placed more than 150,000 calls to student loan borrowers at inappropriate times – before 8 a.m. and after 9 p.m. in the borrower’s time zone. Discover learned about these violations in October 2012 but failed to address the problem until February 2013.
    • Engaged in illegal debt collection tactics: Discover acquired a portfolio of defaulted debt from Citibank but failed to comply with the consumer notices required by federal law. For example, the company failed to provide consumers with specific information about the amount and source of the debt and the consumer’s right to contest the debt’s validity. That information must be provided during the debt collector’s initial communication or in a written notice immediately following that initial communication.

    Enforcement Action

    Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Among the terms of the consent order filed today, Discover must:

    • Return $16 million to more than 100,000 borrowers: Specifically, Discover will:
    • Provide an account credit (or a check if the loans are no longer serviced by Discover) to the consumers who were misled about their minimum payments in an amount equal to the greater of $100 or 10 percent of the overpayment, up to $500. About 5,200 victims will get this credit;
    • Reimburse up to $300 in tax preparation costs for consumers who amend their 2011 or 2012 tax returns to claim student loan interest deductions. For consumers who do not participate in this tax program or did not take advantage of earlier ones offered by the company, Discover will issue an account credit of $75 (or a check if their loans are no longer serviced by Discover) for each relevant tax year. About 130,000 victims will receive this relief; and
    • Provide account credits of $92 to consumers subjected to more than five but fewer than 25 out-of-time collection calls and account credits of $142 to consumers subjected to more than 25 calls. About 5,000 victims will receive these credits.
    • Accurately represent the minimum periodic payment: Discover cannot misrepresent to consumers the minimum periodic payment owed, the amount of interest paid, or any other factual material concerning the servicing of their loans.
    • Send clear and accurate student loan interest and tax information to borrowers: Discover must send borrowers the IRS W-9S form that it requires them to complete to receive a form 1098 from the company, and it must clearly explain its W-9S requirement to borrowers. Discover must also accurately state the amount of student loan interest borrowers paid during the year.
    • Cease making calls to consumers before 8 a.m. or after 9 p.m.: Discover must contact overdue borrowers at reasonable times. This will be determined by the time zone of the consumer’s known residence or phone number, unless the consumer has expressly authorized Discover to call outside these hours.
    • Pay $2.5 million civil penalty: Discover will pay $2.5 million to the CFPB’s Civil Penalty Fund.

    Big Win for CFPB on Debt Collection

    Thursday, July 16th, 2015

    CFPB Takes Action to Stop Illegal Debt Collection Lawsuit Mill

    Order Would Bar Georgia Law Firm from Churning Out Illegal Collections Lawsuits and Require $3.1 Million Penalty

    WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) filed a proposed consent order in federal court that would resolve a lawsuit against Frederick J. Hanna & Associates, a Georgia-based law firm, and its three principal partners, for operating an illegal debt collection lawsuit mill. The CFPB lawsuit had alleged that the defendants rely on deceptive court filings and faulty evidence to churn out lawsuits. The order, if approved by the court, would bar the firm and its principal partners from illegal debt-collection practices, including filing lawsuits without being able to verify the consumers’ debt is owed, and intimidating consumers with deceptive court filings. The order would also require the firm and its principals to pay $3.1 million to the Bureau’s Civil Penalty Fund.

    “The Hanna firm relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed,” said CFPB Director Richard Cordray. “Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers.”

    The Hanna law firm focuses exclusively on debt collection litigation, and its three principal partners, Frederick J. Hanna, Joseph Cooling, and Robert Winter, play an active role in the company’s business strategies and practices. The firm performs debt collection activities on behalf of clients that include banks, credit card issuers, and companies that purchase and sell consumer debt. The Hanna law firm typically files lawsuits if its efforts do not lead to collections.

    In July 2014, the CFPB filed suit against the firm and its principal partners in federal court in the Northern District of Georgia. The proposed consent order filed today would resolve the case. In its complaint, the CFPB charged the law firm with violating the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive practices as well as the Fair Debt Collection Practices Act by:

    • Intimidating consumers with deceptive court filings: The CFPB alleged that the firm filed collection suits signed by attorneys when, in fact, there was no meaningful involvement of attorneys. The lawsuits were the result of automated processes and the work of non-attorney staff. The resulting lawsuits misrepresented to consumers that they were “from attorneys.” This process allowed the firm to generate and file hundreds of thousands of lawsuits. One attorney at the firm, for example, signed over 130,000 debt collection lawsuits over a two-year period.
    • Introducing faulty or unsubstantiated evidence: The CFPB alleged that the firm used sworn statements from its clients attesting to details about consumer debts to support its lawsuits. The firm filed these statements with the court even though in some cases the signers could not possibly have known the details they were attesting to. In a substantial number of cases, when challenged, the firm dismissed lawsuits. Between 2009 and 2014, the firm dismissed over 40,000 suits in Georgia alone, and the CFPB believes it did so frequently because it could not substantiate its allegations.

    Enforcement Action

    Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. The CFPB’s proposed order, if approved by the court, would:

    • End illegal collection and intimidation tactics: The Hanna law firm and its principal partners would be prohibited from filing lawsuits or threatening to sue to enforce debts unless they have specific documents and information showing the debt is accurate and enforceable.
    • Clean up attorney practices: Under the proposed order, the Hanna law firm and its partners would be prohibited from filing or threatening lawsuits unless they or their attorneys have reviewed specific documentation related to the consumer’s debt. The law firm would also be required to create a record of that review.
    • Prohibit deceptive court filings: The CFPB alleged that the firm files sworn statements from its clients with the court even though in some cases the signers could not possibly know the details they are attesting to. Under the proposed order, the defendants would not be permitted to use affidavits as evidence to collect debts unless the statements specifically and accurately describe the signer’s knowledge of the facts and the documents attached.
    • Pay a $3.1 million penalty: The firm and its principal partners would be jointly required to pay a $3.1 million penalty to the CFPB’s Civil Penalty Fund.

    This action is part of the Bureau’s work to address illegal debt collection practices across the consumer financial marketplace, including companies who sell, buy, and collect debt. For instance, in separate enforcement actions, the CFPB has ordered three of the Hanna law firm’s clients, JPMorgan Chase, Portfolio Recovery Associates, and Encore Capital Group, to overhaul their debt collection practices and to refund millions to harmed consumers. The Bureau will continue working to ensure all players in the collections market treat consumers fairly.

    The final consent order can be found at: http://files.consumerfinance.gov/f/201601_cfpb_stipulated-final-judgment-and-order-frederick-j-hanna.pdf

    The CFPB’s complaint in the lawsuit can be found at:http://files.consumerfinance.gov/f/201407_cfpb_complaint_hanna.pdf

    The proposed consent order filed today follows an earlier court order issued in July 2015 that rejected the defendants’ motion to dismiss the case. Among other things, that court ruling held that attorneys have an obligation to meaningfully review the facts of a lawsuit before filing it and that the CFPB has the authority to take action against attorneys engaged in illegal consumer debt-collection practices.

    The court’s July 2015 ruling can be found at: http://files.consumerfinance.gov/f/201512_cfpb_order-frederick-j-hanna.pdf

    ###
    The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visitconsumerfinance.gov.

     

    FCC Releases Long-Awaited TCPA Ruling And Order

    Saturday, July 11th, 2015

    STATEMENT OF FCC CHAIRMAN TOM WHEELER

    Re: In the Matter of Rules and Regulations Implementing the Telephone Consumer Protection Act of 1991, CG Docket No. 02-278, WC Docket No. 07-135

    The American public has asked us – repeatedly – to do something about unwanted robocalls. Today we help Americans hang up on nuisance calls.

    We use our telephones – increasingly, our indispensable smart phones – to talk to family and friends, to take care of business, to make plans, to share good news, and sometimes, when things don’t go well, to make a complaint. Over the past several years, hundreds of thousands of consumers have made their voices heard by complaining to the Commission about unwanted telephone calls – calls they didn’t ask for, that they don’t want, and that they can’t stop. Today, we help them gain some of their privacy back.

    Complaints under the Telephone Consumer Protection Act (TCPA), the law that makes unwanted robocalls and texts illegal, are together the largest complaint category we have at the Commission. Last year alone, we received more than 215,000 such complaints. The data reveal the scale of the robocall problem. The individual stories behind them reveal the costs.

    Consider Brian, who writes: “Robocalls are a daily occurrence on both my landline, and increasingly, on my mobile number. These interruptions impact my productivity. Each call takes me off task and further time is lost trying to pick up where I left off when the interruption occurred. . . . We The Consumers pay for these telephony services; these are our phones and we deserve to be allowed to control who calls us.”

    Or how about Peggy, who writes: “I live in a large home and have many medical issues . . . . [T]hese robocalls . . . cause me to stress out because I can’t get to the phone . . . . Simply put, it’s stalking. . . . It’s more than just annoying, it’s unethical. . . . They are invading my privacy, period.”

    And it’s not just calls, it’s text messages too. One consumer told us they received 4,700 unwanted texts over a 6-month period.

    Our vehicle for helping consumers today is resolving an unprecedented number of requests for clarification. We rule on 21 separate matters that collectively empower consumers to take back control of their phones. These rulings have a simple concept: you are the decision maker, not the callers.

    For the first time, we clarify that there is no legal reason carriers shouldn’t offer their customers popular robocall-blocking solutions, so that consumers can use market-based approaches to stop unwanted calls. We also clarify that callers cannot skirt their obligation to get a consumer’s consent based on changes to their calling equipment or merely by calling from a list of numbers. We make it clear that it should be easy for consumers to say “no more” even when they’ve given their consent in the past.

    And if you have the bad luck of inheriting a wireless number from someone who wanted all types of robocalls, we have your back. We make it clear first that callers have a number of tools to detect that the number has changed hands and that they should not robocall you, and we provide the caller one single chance to get it wrong before they must get it right. This is critical because we have heard from consumers that getting stuck with a reassigned number can lead to horrible consequences. One consumer received 27,809 unsolicited text messages over 17 months to one reassigned number, despite their requests to stop the texts.

    Some argue that we have not updated the TCPA to reflect modern calling and consumer expectations in an increasingly mobile-phone world, and this hurts businesses and other callers. Quite the contrary: we provide the clarifications that responsible businesses need to responsibly use robocalling equipment. Indeed, we interpret the TCPA in a commonsense way that benefits both callers and consumers. Exhibit A is that we clear the way for time-sensitive calls about consumer healthcare and bank accounts, so that consumers can get the information as quickly as possible. With important conditions on the number of calls and opt-out ability, we prove that both consumers and businesses can win under the TCPA.

    We all love our phones, and we now carry them wherever we go. Today, we give consumers their peace back. It’s simple: consumers should be able to make the decision about whether they receive automated calls. If they want them, they can consent. And if they don’t consent, they should be left alone.

    Thank you to my colleagues for their excellent input on this item, and for sending a clear message that this Commission will continue to act on behalf of consumers.

    And thank you to our Consumer and Governmental Affairs Bureau for their hard work on behalf of consumers – and for the diligent efforts of the Commission staff who assisted CGB with this item

    OCC Fines JPMorgan Chase $30 Million for Deficiencies in Debt Collection Practices and Servicemembers Civil Relief Act Compliance

    Wednesday, July 8th, 2015

    OCC Fines JPMorgan Chase $30 Million for Deficiencies in Debt Collection Practices and Servicemembers Civil Relief Act Compliance

    WASHINGTON — The Office of the Comptroller of the Currency (OCC) today assessed a $30 million civil money penalty against JPMorgan Chase Bank, N.A.; JPMorgan Bank and Trust Company, N.A.; and Chase Bank USA, N.A. for unsafe or unsound practices related to the non-home loan debt collection litigation practices and to the Servicemembers Civil Relief Act (SCRA) compliance practices.

    The unsafe or unsound practices involved deficiencies in the bank’s practices and procedures related to the preparation and notarization of affidavits and other sworn documents used in the bank’s debt collection litigation and deficiencies in its SCRA compliance program.

    The penalty, paid to the U.S. Treasury, follows the enforcement action issued by the OCC on September 18, 2013. That order required the bank to provide remediation to affected consumers and to correct deficiencies in the bank’s practices and procedures.

    As of June 2015, consumers have received more than $50 million as a result of the OCC’s 2013 orders. Bank management continues to identify impacted consumers and servicemembers as required under the OCC Consent Order, and will pay additional restitution to affected consumers as necessary.

    OCC national bank examiners continue to monitor the bank’s compliance with the order.

    The Consumer Financial Protection Bureau (CFPB) along with 47 states and the District of Columbia, are taking separate actions, which were also announced today.

    Statement of Thomas J. Curry Comptroller of the Currency On Civil Money Penalties Assessed Against JPMorgan Chase Bank July 8, 2015 The civil money penalty we are assessing today follows an enforcement action that we took against JPMorgan Chase Bank N.A. and two of its affiliates in 2013. That action focused on non-mortgage debt collection practices and Servicemember Civil Relief Act compliance. At that time, we required corrective action to address the deficiencies plus restitution for customers harmed by improper practices. To date, more than $50 million in restitution has been paid by the bank to affected customers. Compliance with the Servicemembers Civil Relief Act, or SCRA, is a matter of great concern to me and to the OCC. The men and women who serve in the uniformed military not only put themselves at risk, but they give up the comforts of home and family, and they sacrifice financially. Congress took note of their financial sacrifice in passing the SCRA, and we recognized it in changes we made to our examination procedures in 2013. At that time, we mandated that SCRA compliance be evaluated as part of every exam at every institution we supervise. Each of those examinations must include a review of the process the bank uses to comply with rate reduction requests from individuals who go on active duty, as well as an evaluation of the bank’s foreclosure practices with respect to servicemembers. Although these steps are not required by law, we felt they were necessary to ensure that the men and women who serve our country receive the legal protections they are entitled to. With respect to debt collection, it was dismaying to find that documents being used in litigation were being rushed through in a process that has come to be known as “robosigning.” Our action in 2013 was aimed at ensuring that affidavits and other sworn documents are accurate, based on the knowledge of the person signing the document, and properly notarized. Today, after having taken time to assess the full extent of the deficiencies, we are joining with the CFPB and the states in assessing monetary penalties. These come on top of the restitution required by our previous order, and they will help ensure that banks treat all customers, including member of the armed services, fairly

    CFPB, 47 States and D.C. Take Action Against JPMorgan Chase for Selling Bad Credit Card Debt and Robo-Signing Court Documents

    Wednesday, July 8th, 2015

    CFPB, 47 States and D.C. Take Action Against JPMorgan Chase for Selling Bad Credit Card Debt and Robo-Signing Court Documents

    Chase Ordered to Overhaul Debt Sales and Halt Collections on 528,000 Consumers’ Accounts

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau and Attorneys General in 47 states and the District of Columbia took action against JPMorgan Chase for selling bad credit card debt and illegally robo-signing court documents. The CFPB and states found that Chase sold “zombie debts” to third-party debt buyers, which include accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectible. The order requires Chase to document and confirm debts before selling them to debt buyers or filing collections lawsuits. Chase must also prohibit debt buyers from reselling debt and is barred from selling certain debts. Chase is ordered to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumers’ accounts. Chase will pay at least $50 million in consumer refunds, $136 million in penalties and payments to the CFPB and states, and a $30 million penalty to the Office of the Comptroller of the Currency (OCC) in a related action.

    “Chase sold bad credit card debt and robo-signed documents in violation of law,” said CFPB Director Richard Cordray. “Today we are ordering Chase to permanently halt collections on more than 528,000 accounts and overhaul its debt-sales practices. We will continue to be vigilant in taking action against deceptive debt sales and collections practices that exploit consumers.”

    Chase Bank, USA N.A. and its subsidiary Chase BankCard Services, Inc. are based in Newark, Del. and provide consumers with credit card accounts. From 2009 to 2013, when consumers defaulted on debts, Chase attempted to collect by contacting consumers, filing collections lawsuits, and selling accounts to third-party debt buyers. When Chase sold accounts, it provided debt buyers with an electronic sale file containing certain basic information about the debts from Chase’s internal databases, which the debt buyers used to collect on the debts. Chase was also responsible for preparing affidavits to verify debts when it or its debt buyers filed lawsuits to collect on defaulted credit card debts.

    The CFPB found that Chase violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, or abusive acts and practices. Chase sold faulty and false debts to third-party collectors, including accounts with unlawfully obtained judgments, inaccurate balances, and paid-off balances. Chase also sold debts that were owed by deceased borrowers. Chase also filed misleading debt-collections lawsuits against consumers using robo-signed and illegally sworn statements to obtain false or inaccurate judgments for unverified debts. Specifically, the CFPB and states found that Chase:

    • Sold bad debts to third-party debt buyers: Chase sold certain accounts that had already been settled by agreement, paid in full, discharged in bankruptcy, identified as fraudulent and not owed by the debtor, subject to an agreed-upon payment plan, no longer owned by Chase, or that were otherwise no longer enforceable. Chase also sold debts with missing or erroneous information such as whether the debt had been paid and the amount owed.
    • Assisted third-party debt buyers in deceptively collecting debt: By selling inaccurate or uncollectable debts, Chase subjected certain consumers to debt collection by its debt buyers on accounts that were not theirs, in amounts that were incorrect or uncollectable. Chase knew, or should have known, that third-party debt buyers would seek to collect these faulty debts. Therefore, by providing inadequate or incorrect information, Chase assisted debt buyers in deceptive collection activities.
    • Robo-signed affidavits to sue consumers for unverified debt: Chase filed more than 528,000 debt collections lawsuits against consumers and provided more than 150,000 sworn statements to debt buyers for their collections lawsuits against consumers, often using robo-signed documents. In doing so, Chase systematically failed to prepare, review, and execute truthful statements as required by law. Chase also made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts. Chase failed to notify consumers and the courts once it learned of these problems.

    Enforcement Action

    Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Chase suspended collections litigation in 2011 and stopped selling debts in 2013. The CFPB and state actions provide relief for injured consumers, prohibit Chase from reviving its unlawful practices, and impose penalties for Chase’s law violations. Specifically, the order requires Chase to:

    • Cease collecting on 528,000 accounts: Chase cannot collect, enforce in court, sell, or transfer debts for consumers whose Chase credit card accounts were sent to collections litigation between January 1, 2009 to June 30, 2014. If Chase previously obtained a court judgment requiring consumers to pay the debt, Chase will notify the consumer that they will not try to collect, enforce, or sell the judgment. Chase will also contact the three major credit reporting companies to request that the judgments not be reported against consumers. These accounts had an original face value estimated at several billion dollars when Chase sent them to collections litigation. The actual market value is now estimated in the tens or hundreds of millions of dollars. Debt relief of this kind permanently protects consumers from any further collections and judgments on these accounts.
    • Pay at least $50 million in cash redress to consumers: Chase will pay cash refunds to consumers against whom collections litigation was pending between January 1, 2009 and June 30, 2014, for amounts paid above what the consumer owed when the debt was referred for litigation, plus 25 percent of the excess amount paid.
    • Prohibit debt buyers from reselling accounts: Chase must require by contract or agreement that debt buyers cannot resell debts purchased from Chase, unless to sell back to Chase.
    • Confirm debt before selling to debt buyers: Chase cannot sell debts that have been paid, settled, discharged, or are otherwise uncollectable. Prior to sale, Chase must provide account-level documentation to debt buyers confirming that the debts are accurate and enforceable. For a minimum of three years after selling the debt, Chase must make certain additional account information available to debt buyers including agreements, statements, and dispute records.
    • Notify consumers that their debt has been sold and make their account information available to them: Chase must notify consumers when their account is sold and reveal who purchased the account, the amount owed at the time of sale, and that consumers can request further information about their accounts at no charge.
    • Not sell zombie debts and other specified debts: Chase may not sell debts that do not have the required documentation, have been charged off for over three years or where the consumer has not paid for three years, are in litigation, are owed by a servicemember, are owed by someone who is deceased, or where the debtor has a payment plan.
    • Withdraw, dismiss, or terminate collections litigation: Chase will withdraw, dismiss, or terminate all pre-judgment collections litigation pending at any time after January 1, 2009.
    • Stop robo-signing affidavits: Declarations must be signed by hand, must reflect the actual date of signing, and must be based on the direct knowledge of the person signing and their review of Chase’s business records. Supporting documents submitted for debt collection litigation must be actual records of the debt, verified to be accurate, and not created solely for litigation.
    • Verify debts when filing a lawsuit: When filing collections lawsuits, Chase is required to submit specific information associated with the debt including the name of the creditor at the time of the last payment, the date of the last extension of credit, the date of the last payment, the amount of debt owed, and a breakdown of any post-charge-off interest and fees.
    • Pay $30 million civil penalty: Chase will pay a fine for its unlawful debt sales and robo-signing practices.

    Chase must also implement policies, procedures, systems, and controls to ensure compliance with federal consumer financial laws when selling and collecting debts.

    The Bureau is joined by 47 states and the District of Columbia in today’s action. The Bureau also worked in coordination with the OCC, which entered into a related agreement with Chase in 2013. The total relief to consumers includes debt relief associated with halting collections on more than 528,000 consumers’ accounts and at least $50 million in refunds. The amount of penalties and payments to states includes a $30 million civil penalty paid to the CFPB, a $30 million civil penalty paid to the OCC on the related matter, and $106 million in payments to states.

    Supplement Marketers Will Relinquish $1.4 Million to Settle FTC Deceptive Advertising Charges

    Wednesday, July 8th, 2015

    Ads Claimed Procera AVH Would Restore 10 to 15 Years of Memory Loss

    The marketers of a dietary supplement called Procera AVH will relinquish $1.4 million under settlements resolving Federal Trade Commission charges that they deceived consumers with claims that the supplement was clinically proven to significantly improve memory, mood, and other cognitive functions.

    Under the terms of the settlements, the defendants will pay $1 million to the FTC, and another $400,000 to satisfy a judgment in a case brought by local California law enforcement officials. They also will be barred from making similar deceptive claims in the future and from misrepresenting the existence, results, or conclusions of any scientific study.

    “The defendants in this case couldn’t back up their claims that Procera AVH would reverse age-related mental decline and memory loss,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Be skeptical of ads promising quick and easy cures.”

    According to the FTC’s complaint, the defendants marketed and sold Procera AVH as a “solution” to memory loss and cognitive decline, including as associated with aging. The defendants advertised the product using infomercials, direct mail flyers, newspapers, and the Internet.

    In one newspaper ad for the product the headline stated: “Memory Pill Helps the Brain Like Prescription Glasses Help the Eyes … Remarkable changes observed, helps users match the memory power of others 15 years younger in as little as 30 days!”

    The cover of a multi-page direct mail ad was called a “Special Edition” of the “Physician’s Mind and Memory Alert.” Inside the text stated: “The thought of being a prisoner in one’s own home, or being unable to recall who you are, where you live, or to whom you are related is sending forgetful baby boomers and retirees scrambling for a solution.” The ad then promoted Procera AVH as “the memory pill preferred by many doctors.”

    Procera AVH typically cost $79 per bottle, or $119 for three bottles for consumers who signed up for the continuity purchase plan and agreed to get automatic refills.

    The complaint names KeyView Labs LLC, Brain Research Labs, LLC, George Reynolds (a/k/a Josh Reynolds), John Arnold, and three related companies.

    The Commission’s complaint alleges that efficacy claims for Procera AVH were false, misleading, or unsubstantiated and that the defendants falsely claimed that a scientific study proved the products efficacy. The complaint also charges Reynolds, the founder and chief science officer of Brain Research Labs, with making deceptive expert endorsements for Procera AVH.

    The two proposed settlement orders against the defendants impose a $61 million judgment against KeyView and a $91 million judgment against the remaining defendants.

    The judgments direct the defendants to pay $1 million to the FTC, and an additional $400,000 to satisfy a judgment obtained by local law enforcement in Santa Cruz, California against Brain Research Labs and Reynolds. If the $400,000 is not paid to satisfy the Santa Cruz judgment, it is immediately due to the Commission. Once the $1.4 million is paid, the judgments will be suspended.

    The Commission votes approving the complaint and two proposed stipulated final orders were each 5-0. The orders are subject to court approval. The FTC filed the complaint and proposed orders in the U.S. District Court for the Central District of California.

    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 final orders have the force of law when approved and signed by the District Court judge.

     

    National Collegiate Student Loan Trust Cases

    Thursday, July 2nd, 2015

    Please contact us if one of the National Collegiate Student Loan Trusts is trying to collect a loan from you in Illinois.

    NCT files about 125 lawsuits per month in Cook County alone, and more in other counties.

    Do not allow NCT to get a judgment against you by failing to respond to a summons and complaint.  NCT has obtained hundreds of judgments against people who did not bother to defend themselves.  If you fail to respond, they can get a default judgment against you and then garnish your non-exempt wages, seize your non-exempt assets and put liens on your property.

    Also, do not agree to a judgment with an agreement that you will pay a small sum per month for six months or so.  NCT tries to get people to agree to this.  If  you do this you have waived your right to dispute the debt and at the end of that period the judgment  can be enforced against your nonexempt assets and up to 15% of your wages.   Judgments are enforceable for 20-27 years in Illinois, and bear interest at 9%.  Some of these agreements don’t even pay the interest on the judgment.  Any agreement should completely resolve the debt, with a substantial discount.

    Don’t make the mistake of calling NCT or its attorneys or debt collectors before speaking to an attorney.

    NCT cases often have problems with them for a wide variety of reasons  NCT   sometimes cannot prove that it has the right to collect on the student loan debt at issue. Sometimes it cannot prove  the amount due.  Some suits appear to be filed beyond the statute of limitations.  NCT loans are actually serviced by NCO Financial/ Transworld, an organization which has a long history of consent orders and government investigations; this casts doubt on the accuracy of any records it produces.

    We have lots of experience defending NCT cases, and have also brought a number of affirmative claims challenging NCT’s  collection practices.  If you are currently being sued by NCT, or anticipate a lawsuit in the near future please call us immediately.