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    Edelman, Combs, Latturner, & Goodwin, LLC

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    Chicago, IL 60603

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    Phone: 312-739-4200
    Fax: 312-419-0379


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    Archive

    Sherman Financial Group

    Saturday, August 29th, 2015

    Please contact us if any of the following companies has accessed your credit report:

    Credit One Bank

    Granite Asset Management

    Resurgence

    Sherman Financial Group

    US Court of Appeals for the Third Circuit Upholds FTC’s Authority to Regulate Cybersecurity in FTC v. Wyndham Worldwide Corp.

    Wednesday, August 26th, 2015

    Third Circuit rules in FTC v. Wyndham case

    FTC watchers and data security mavens, it’s the decision you’ve been waiting for. The United States Court of Appeals for the Third Circuit has issued a ruling in the Commission’s favor in FTC v. Wyndham Worldwide Corporation.

    The FTC sued the hospitality company and three subsidiaries, alleging that data security failures led to three data breaches at Wyndham hotels in less than two years. According to the complaint, those failures resulted in millions of dollars of fraudulent charges on consumers’ credit and debit cards – and the transfer of hundreds of thousands of consumers’ account information to a website registered in Russia.

    In 2014, a federal District Court in New Jersey denied Wyndham’s motion to dismiss the FTC action. The Third Circuit agreed to hear an immediate appeal on two issues: “whether the FTC has authority to regulate cybersecurity under the unfairness prong of § 45(a); and, if so, whether Wyndham had fair notice its specific cybersecurity practices could fall short of that provision.”

    If your clients are concerned about data security – and they should be – you’ll want to read the entire opinion. But the long and the short of it is that the Third Circuit upheld the District Court’s ruling that the FTC could use the prohibition on unfair practices in section 5 of the FTC Act to challenge the alleged data security lapses outlined in the complaint. The Court also rejected Wyndham’s fair notice argument.

    Of course, the case is still pending before the District Court, but the Third Circuit ruling affirms important principles for how the FTC Act applies in the data security arena.

    The decision is a must-read for business executives and attorneys.

    NCSLT — National Collegiate Student Loan Trusts (update)

    Wednesday, August 26th, 2015

    Please contact us if one of the National Collegiate Student Loan Trusts (“NCT”) is trying to collect a loan from you in Illinois, whether by lawsuit or dunning you.

    The servicer of the NCT loans, Transworld Systems, Inc. (formerly NCO Financial Services), is under federal investigation for its handling of these loans.

    About 125 lawsuits per month are filed to collect NCT loans in Cook County alone, with more in other counties.

    Important information:

    1.     Under no circumstances should you 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 even though they had valid defenses.  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 real property.

    2.     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.

    3.     Don’t make the mistake of calling NCT or its attorneys or debt collectors before speaking to an attorney.  We will review your documents and facts and consult with you without charge, and advise you whether we will take your case and what our fees will be.

    4.     We believe that most NCT cases have serious problems with them, for a number  of reasons.   First, we believe that virtually all of the lawsuits filed on these loans violate Illinois law.  Second, 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.  Finally, we believe that many or all of the obligations of cosigners under these loans may not be enforceable.

    As noted above, NCT loans are actually serviced by Transworld/ NCO Financial, an organization which has a long history of consent orders and government investigations and is currently under investigation by the Consumer Financial Protection Bureau; 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.

    Navient (Sallie Mae spinoff of student loan business) under federal investigation

    Wednesday, August 26th, 2015

    Disclosure in Navient’s SEC filings:

    On August 19, 2015, Navient Solutions, Inc. (“NSI”), a wholly-owned subsidiary of Navient Corporation (the “Company,” “we” or “us”), received a letter from the CFPB notifying NSI that, in accordance with the CFPB’s discretionary Notice and Opportunity to Respond and Advise (“NORA”) process, the CFPB’s Office of Enforcement is considering recommending that the CFPB take legal action against NSI. The NORA letter relates to a previously disclosed investigation into NSI’s disclosures and assessment of late fees and other matters and states that, in connection with any action, the CFPB may seek restitution, civil monetary penalties and corrective action against NSI.

    The purpose of a NORA Letter is to ensure that a party being investigated by the CFPB has the opportunity to present its positions to the CFPB before an enforcement action is recommended or commenced, in the form of a written statement setting forth any reasons of law or policy why the party believes the CFPB should not take legal action against it. NSI continues to believe that its acts and practices relating to student loans are lawful and meet industry standards and, where applicable, the statutory or contractual requirements of NSI’s other regulators. As such, NSI intends to make a NORA submission to the CFPB.

    The Company is committed to resolving any potential concerns. However, it is currently unable to predict the timing or outcome of the NORA process. The Company cannot provide any assurance that the CFPB will not ultimately take legal action against NSI or that the outcome of any such action, if brought, will not have a material adverse effect on the Company. It is also not possible at this time to estimate a range of potential exposure, if any, for amounts that may be payable in connection with these matters and, as a result, reserves have not been established.

    Mortgage company door hangers

    Monday, August 24th, 2015

    Please contact us if a mortgage company has left door hangers on your home.

    Data Brokers Charged in $7M Payday Loan Scam

    Wednesday, August 12th, 2015

    FTC Charges Data Brokers with Helping Scammer Take More Than $7 Million from Consumers’ Accounts

    Sold Personal Financial Information Obtained from Online Payday Loan Applications

    FOR RELEASE

    The Federal Trade Commission has charged a data broker operation with illegally selling payday loan applicants’ financial information to a scam operation that took millions of dollars from consumers by debiting their bank accounts and charging their credit cards without their consent.

    According to the FTC’s complaint, the data broker enterprise bought loan applications from the operators of payday loan websites, and got others directly from consumers via their own payday loan websites. Instead of passing on those applications to legitimate payday lenders, the defendants sold the information to companies like Ideal Financial Solutions Inc., which purchased the financial account information for more than 500,000 consumers from the defendants and raided their accounts for at least $7.1 million. As a result, some consumers had to close their accounts or were charged fees for insufficient funds.

    “Scammers used consumer information they bought from this operation to make millions in unauthorized charges,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Companies that collect people’s sensitive information and give it to scammers can expect to hear from the FTC.”

    The defendants often sold payday loan applications to Ideal Financial for about 50 cents each, while legitimate lenders pay up to $100 or more. The complaint alleges they did this knowing that Ideal Financial was making unauthorized bank account debits and credit card charges. In fact, according to the complaint, the defendants helped hide Ideal Financial’s fraud by using fine-print disclosures on their websites as well as other misleading tactics to avoid alerting banks to the fraudulent activity.

    The defendants are Sequoia One LLC, Gen X Marketing Group LLC, Jason A. Kotzker, Theresa D. Bartholomew, John E. Bartholomew, Jr., and Paul T. McDonnell.

    Three of the defendants, Paul T. McDonnell, Theresa D. Bartholomew, and John E. Bartholomew, Jr., have agreed to settle the FTC charges. Under proposed settlement orders, they are prohibited from selling or otherwise benefitting from customers’ personal information. The order against the Bartholomews imposes a $7.1 million judgment that will be suspended upon  payment of $15,000. The order against McDonnell imposes a judgment of more than $3.7 million, which will be suspended due to his inability to pay. The full judgments will become due immediately if these defendants are found to have misrepresented their financial condition. Litigation against the other defendants continues.

    The Commission vote authorizing the staff to file the complaint and proposed final orders was 5-0. The documents were filed in the U.S. District Court for the District of Nevada. The proposed final orders are subject to court approval.

    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. Final orders have the force of law when approved and signed by the district court judge.

    To learn more, read Online Payday Loans.

    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(link is external), follow us on Twitter(link is external), and subscribe to press releases for the latest FTC news and resources.

    Co-signers often caught in private student loans

    Sunday, August 9th, 2015

    CFPB Finds 90 Percent of Private Student Loan Borrowers Who Applied for Co-Signer Release Were Rejected

    Industry Inquiry Reveals Problems for Consumers Seeking to Prevent Auto-Defaults

    WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released a report finding high rates of consumers are being rejected for co-signer release on their private student loans, based on its review of industry practices. The Bureau uncovered problematic industry practices that may be disqualifying some consumers from securing a co-signer’s release from their loans. When student borrowers and co-signers seek a co-signer release but are unable to obtain it, the co-signer can suffer from damage to their credit or be subject to higher rates on other forms of credit. This can also result in serious financial distress for the borrower if a company triggers an auto-default when a co-signer dies or goes bankrupt.

    “Parents and grandparents put their financial futures on the line by co-signing private student loans to help family members achieve the dream of higher education,” said CFPB Director Richard Cordray. “Responsible borrowers and their co-signers should have clear information and standards for releasing the co-signer if the time is right. We’re concerned that the broken co-signer release process is leaving responsible consumers at risk of damaged credit or auto-default distress.”

    The CFPB Student Loan Ombudsman’s Mid-Year Update is available at:http://files.consumerfinance.gov/f/201506_cfpb_mid-year-update-on-student-loan-complaints.pdf

    “Private student loan companies should own up to borrowers when they qualify for valuable benefits, clean up contracts with surprises buried in the fine print, and step up to provide borrowers and their co-signers the service they deserve,” said CFPB Student Loan Ombudsman Rohit Chopra.

    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. 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. In general, private student loans carry higher interest rates and lack flexible repayment options, compared to federal student loans. Unlike other markets, independent data on the size and performance of the private student loan market is not available to investors and the public.

    Most private student loans require a co-signer. In fact, according to a 2012 report on private student loans published by the CFPB and the Department of Education, while co-signers were less often required during the years prior to the financial crisis, by 2011 more than 90 percent of new private student loans were co-signed, often by a parent or grandparent.

    A co-signer may help a borrower access credit or obtain a lower rate because they may be more creditworthy and can step in if a borrower is unable to repay. However, borrowers have also been hit with a default because of activities related to the co-signer, even if the borrower is paying on time. However, the loan will appear on the co-signer’s credit record which will count towards the co-signer’s total debt level and can affect the co-signer’s credit score if the loan is not repaid. Consumers also can be at a disadvantage if they are unable to obtain a co-signer release. For example, a co-signer may also have a more difficult time obtaining an affordable rate on other credit, making it more expensive to refinance a home or to buy a car.

    Last year, the CFPB released a report highlighting complaints related to auto-defaults. Consumers reported that private student lenders and servicers placed borrowers in default when a co-signer died or filed for bankruptcy, even if the loan was in good standing.

    Following the report, the Bureau’s Student Loan Ombudsman issued an information request to companies comprising much of the activity in the market in order to better understand and address current practices and policies affecting consumers.

    Today’s report includes findings of the information request from industry participants as well as analysis of more than 3,100 private student loan complaints and approximately 1,100 debt collection complaints related to student loan debt received between October 1, 2014, and March 31, 2015. Overall, private student loan complaints increased by 34 percent compared to the same time period last year.

    Among the issues that consumers face:

    • Companies rejected 90 percent of consumers who applied for co-signer release: Many private student lenders advertise options to release a co-signer from a private student loan. However, an analysis of industry responses to the CFPB’s information request found that the lenders and servicers surveyed granted very few releases—of those borrowers that applied for co-signer release, 90 percent were rejected.
    • Consumers left in the dark on co-signer release criteria: The CFPB found that consumers have little information on the specific borrower criteria needed to obtain a co-signer release. Consumers reported being confused about their eligibility for obtaining a co-signer release as well as not understanding why they had been denied.
    • Most private student loan contracts continue to contain auto-default clauses: Last year, the CFPB reported that private student loan servicers were putting borrowers in default when a co-signer died or filed for bankruptcy, even when their loans were otherwise in good standing. Following that report, some financial institutions stated that they would no longer hit borrowers with auto-defaults. The CFPB’s analysis of private student loan contracts, however, found that most private student loan contracts continue to include auto-default clauses.
    • Borrowers are at risk when loans are sold and packaged by Wall Street: Even if individual companies state that they will not trigger auto-defaults in certain cases, loans are often sold to other banks and securitized on Wall Street. This exposes borrowers to risk that the new owner of the loan will trigger an auto-default.
    • Company policies can permanently disqualify borrowers from co-signer release: Student loan borrowers reported that some companies’ policies penalize or disqualify borrowers who prepay their loans and are in good standing. Some companies also disqualify borrowers from releasing a co-signer if the consumer accepts the servicer’s offer of postponing payment through forbearance. These company policies can permanently ban a consumer from seeking co-signer release for the life of the loan and penalize consumers that may have graduated during tough economic times.
    • Potentially harmful clauses found in the fine print: In addition to auto-default clauses, the CFPB found other potentially harmful clauses hidden in fine print of some loans including “universal default” clauses. Financial institutions use these clauses to trigger a default if the borrower or co-signer is not in good standing on another loan with the institution, such as a mortgage or auto loan, that is unrelated to the consumer’s payment behavior on the student loan. These clauses can increase the risk of default for both the borrower and co-signer.

    Today’s report describes opportunities to improve the private student loan industry’s co-signer practices. The report identifies practices that could benefit consumers and industry, including:

    • Improving transparency around co-signer release criteria: Consumers and industry would benefit from increased transparency around the availability of co-signer release, including what specific requirements exist that a borrower needs to meet to obtain a release.
    • Improving consumer notifications for co-signer release eligibility: Private student loan servicers could notify consumers before placing them in a repayment status, such as forbearance, that it would disqualify them from co-signer release. In addition, private student loan servicers could improve their customer service by proactively notifying borrowers when they meet prerequisites for releasing a co-signer, such as making a certain number of on-time payments.
    • Examining potentially harmful clauses in the fine print: The CFPB report notes that policymakers should consider whether auto-default, universal default, and other potentially harmful terms in the fine print of private student loan contracts are appropriate.

    To help borrowers overcome obstacles to co-signer release, the CFPB published a set of sample letters for private student loan borrowers and their co-signers that they can send to the private student loan servicer. These letters instruct servicers to provide clear information about co-signer release policies.

    Last month, the CFPB launched a public inquiry into student loan servicing practices that can make paying back loans a stressful or harmful process for borrowers. The issues that the Bureau is seeking information on include: industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service. The comment period is open until July 13, 2015.The CFPB also launched a new version of the Repay Student Debt tool, which helps borrowers get unbiased tips on how to navigate student loan repayment, along with other sample letters they can send to their student loan servicers.

    The CFPB began accepting consumer complaints about private student loans in March 2012. More information is at: consumerfinance.gov/students.

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    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.