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    Edelman, Combs, Latturner, & Goodwin, LLC

    20 South Clark Street
    Suite 1500
    Chicago, IL 60603
    Phone: 312-739-4200
    Fax: 312-419-0379

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    Loan Machine

    Thursday, December 31st, 2015

    Please contact us if you have a 36% line of credit from The Loan Machine in Illinois.


    Monday, December 28th, 2015

    December 28, 2015

    Office of Communications
    Tel: (202) 435-7170


    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 proposed consent order filed today can be found at:

    The CFPB’s complaint in the lawsuit can be found at:

    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:


    CFPB action against scam collection calls and other abuses

    Thursday, December 17th, 2015

    December 17, 2015

    Office of Communications
    Tel: (202) 435-7170

    T3Leads and Lead Publisher Exposed Consumers to Harassment and Deceit

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today took separate actions against a company and an individual that resold sensitive personal data to lenders and debt collectors, allegedly exposing millions of consumers to harassment and deceit. In a complaint filed in federal court, the CFPB alleged that T3Leads bought and sold personal information from payday and installment loan applications without properly vetting buyers and sellers. It also alleges that T3Leads’ owners unlawfully aided the company’s violations. In addition to monetary relief, the CFPB seeks to require T3Leads to clean up its business practices. In a separate matter, the CFPB took action against Eric V. Sancho, who operated a company called Lead Publisher that sold leads to fraudulent debt collectors without regard for how they would use the data. The CFPB ordered Sancho to disgorge $21,151 he made illegally and banned him from the financial products and consumer leads industries.

    “These operators steered consumers toward bad deals and provided no protection from shady characters and unscrupulous lenders,” said CFPB Director Richard Cordray. “This is a reminder to the middlemen who traffic in personal information: if you ignore warning signs that those buying this data are violating the law, you risk the consequences for the harm you are doing to people.”

    T3Leads, a lead aggregator, is based in Burbank, Calif., and owned by Grigor and Marina Demirchyan. Lead aggregators buy consumer information – called leads – from lead generators, websites that market payday and installment loans. Lead Publisher, owned and operated by Eric V. Sancho and based in Phoenix, Ariz., also bought and sold leads, which contain personal information such as consumers’ names, telephone numbers, home and email addresses, references, and employer information.

    T3Leads’ Unfair and Abusive Trafficking in Personal Information
    The CFPB alleges that T3Leads bought leads and sold them to payday or installment lenders and others with no regard for how the consumers’ information would be used or to the promises lead generators made to consumers. Buyers of leads from T3Leads include lenders tied to Indian tribes or based in foreign jurisdictions. These lenders often skirt state laws and deny the jurisdiction of U.S. courts. The CFPB alleges that T3Leads did not vet or monitor its lead buyers, exploited consumers’ lack of understanding of the risks, costs, and conditions of the loans applied for, and put consumer information at risk of being trafficked for illegal purposes. The CFPB alleges that T3Leads violated the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the Bureau alleges that T3Leads:

    • Ignored false or misleading statements about lenders obtaining consumer applications: Consumers who applied for loans through T3Leads’ lead generators had no control over who received their application and had to trust T3Leads’ selection of lenders in its network. But those lead generators suggested that its lenders met certain standards, and often falsely claimed to match consumers with lenders that “follow the rules” or offer “reasonable” terms.
    • Failed to vet or monitor purchasers: T3Leads failed to vet purchasers before adding them to its network or selling them leads, and did not require lenders to provide information about whether they complied with state laws.
    • Steered consumers toward unfavorable loans: T3Leads’ process often steered consumers to lenders offering less favorable loan terms than otherwise available. In particular, consumers were likely to be connected to lenders that ignore state usury limits or claim immunity from state regulation and jurisdiction. These entities often charge higher interest rates than lenders that do comply with state laws, and they often paid the highest prices for leads from T3Leads.

    Lead Publisher’s Reckless Sales to Illegal Actors
    The CFPB found that from 2011 to 2014, Lead Publisher’s Sancho failed to vet his leads’ sources or buyers. He sold roughly three million leads to two related companies that used the information to harass and deceive consumers into paying alleged debts they did not actually owe. The CFPB found that Lead Publisher, through Eric Sancho, violated the Dodd-Frank Act. Specifically, the Bureau alleges that he:

    • Sold millions of leads to companies that threatened, harassed, and defrauded consumers out of millions of dollars: Lead Publisher sold roughly three million consumer leads to related companies WNY Account Solutions Group, LLC and Universal Debt Solutions, LLC. The CFPB sued those companies in March, alleging that they harassed consumers to collect “phantom debts,” defrauding them out of millions of dollars. Leads purchased from Sancho were used to threaten and lie to consumers to collect debts they did not actually owe.
    • Facilitated fraud and fake “legal actions”: Using personal information purchased from Lead Publisher, WNY threatened consumers with “financial restraining orders” – falsely claiming consumers had bounced checks so they could fraudulently collect debts. Lead Publisher never checked if WNY offered a legitimate product or service to consumers, and did not examine its policies or practices, its legal compliance, or whether it held appropriate licenses.

    Enforcement Actions
    Under the Dodd-Frank Act, the CFPB can take action against institutions or individuals engaged in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws.

    • The complaint against T3Leads and the Demirchyans seeks monetary relief, injunctive relief, and penalties. The Bureau’s complaint is not a finding or ruling that the company has actually violated the law.
    • Lead Publisher is now out of business. Under the order issued today, owner Eric Sancho is banned permanently from the financial products and online consumer leads industries, and has to disgorge $21,151 he obtained illegally.

    Useful advice from Federal Trade Commission

    Tuesday, December 8th, 2015

    Don’t recognize that debt? Here’s what to do.

    Debt collectors make up to one billion contacts with consumers each year. It’s their job to make sure they’re collecting from the right people. But sometimes, they reach the wrong person. Other times, they’re actually part of a fake debt collection scam.

    If you don’t recognize a debt, here’s what you can do:

    Find out who you’re dealing with. Ask for the collector’s name, the company’s name, and its address and phone number. Legitimate collectors will provide this information.

    Don’t give additional personal information. The collector might ask you to confirm personal information. If the collector has the wrong information, like an address or phone number you’ve never used, don’t correct the mistake with the right information. And don’t give any other personal information. If it’s not your debt, but the collector now has the right personal information for you, it could be harder for you to dispute the debt later.

    Refuse to discuss the debt until you get a “validation notice.”Collectors must send you a written notice. It tells you how much money you owe, the name of the creditor, and what to do if you don’t think you owe the money. This notice might help you figure out if you owe the debt.

    Do your own detective work. Reach out to the company the collector says is the original creditor. They might help you figure out if the debt is legitimate – and if this collector has the right to collect the debt. Also, get your free, annual credit report online or at 877-322-8228 and see if the debt shows up there.

    Dispute the debt in writing. If you think you don’t owe some – or all – of the debt, or you just don’t recognize it, send the collector a letter disputing it. Be as specific as possible about why you think the debt is wrong – but give as little personal information as possible. Once you get the validation notice, you have 30 days to send this letter.

    By law, the collector then must stop contacting you – though the debt doesn’t go away. But, if the collector sends you written verification of the debt, they can start contacting you again.

    And, if there’s incorrect information on your credit report, dispute that, too.

    CFPB action against EOS CCA (also known as Collecto)

    Monday, December 7th, 2015

    EOS to Pay More than $2.5 Million in Refunds and Penalties


    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) filed a federal complaint against EOS CCA (EOS), a Massachusetts debt collection firm, for reporting and collecting on old cellphone debt that consumers disputed and EOS did not verify. The company also provided inaccurate information to credit reporting companies about the debt and failed to correct reported information that it had determined was inaccurate. The CFPB filed a proposed consent order that, if entered by the court, would require EOS to overhaul its debt collection practices, refund at least $743,000 to consumers, and pay a $1.85 million civil money penalty.

    “After buying a portfolio of debt, EOS soon learned of several red flags that raised doubts about the debt’s validity. Even so, EOS still proceeded to collect certain disputed and unverified debts,” said CFPB Director Richard Cordray. “It is unacceptable that consumers were harmed by these practices and that the company supplied inaccurate information to the credit reporting companies, so today we are taking action to stop it.”

    EOS is a debt collection company headquartered in Norwell, Mass. that also has a debt-purchasing arm. Like many other debt collectors, EOS collects delinquent or charged-off accounts that were purchased for a fraction of the value of the debt. Although EOS typically pays only pennies on the dollar for the debt, it may attempt to collect the full amount claimed by the original lender. In 2012, EOS paid AT&T $35.4 million for a portfolio of more than three million cellphone accounts with a total face value of $2.3 billion. Many of these debts were old accounts that had been previously sent to multiple collection agencies.

    The CFPB’s investigation found that EOS learned of significant problems with the portfolio a few months after acquiring it. Among other things, the portfolio contained fraudulent, already paid, or already settled debts. Despite this, EOS continued to collect and report on the debts, including debts that consumers disputed, without verifying that those debts remained outstanding. In addition, EOS initially reported all the debts to the credit reporting companies as disputed even though it had no basis to believe that all the debts had in fact been disputed by consumers.

    These practices violated the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the CFPB’s investigation found that EOS:

    • Collected debts that it did not substantiate: EOS learned in January 2013 that, contrary to the sales agreement with AT&T, the portfolio it purchased contained fraudulent debts, debts that consumers had paid or settled, and debts that were so old that they could no longer be legally collected. When consumers disputed the debts, EOS had difficulty getting AT&T to provide sufficient, and in some cases, any documentation to verify the debts. Notwithstanding those issues, EOS continued to report and collect on certain disputed debts that EOS did not verify.
    • Reported inaccurate dispute information to the credit reporting companies: Shortly after it started collecting on the portfolio, EOS reported to the credit reporting companies that all three million of the debts were disputed by consumers, when EOS knew not all of the accounts had been disputed. EOS flip flopped on this twice, removing the dispute flags and then reinserting the dispute flags a month later.

    These unlawful collection and reporting practices resulted in consumers paying debts they did not owe or had no obligation to pay. In the end, EOS collected about $743,000 on more than 2,000 accounts that consumers disputed and that EOS did not verify.

    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. Under the terms of the proposed consent order, EOS would be required to:

    • Refund at least $743,000 to consumers: EOS would be required to provide full refunds of payments made on debts that were disputed but that EOS did not verify.
    • Cease collecting and reporting on disputed AT&T debt: If a consumer has disputed the debt and EOS is unable to substantiate it, EOS would be required to ask the credit reporting companies to remove any information about the debt from the consumer’s file. It would also be barred from collecting on the debt or accepting payment for it.
    • Stop collecting unverified debts: EOS would not be able collect unsubstantiated debt if it has reason to believe the portfolio contains inaccurate information. Under the order, for five years the company would be required to review original account-level documents verifying a debt before collecting on it when, for example, a consumer has disputed it, the seller didn’t promise it was accurate or valid, or the debt was part of a portfolio EOS knew included unsupportable or inaccurate information.
    • Ensure accuracy when providing information to credit reporting companies: EOS would only be permitted to report a debt with a credit reporting company if the debt is accurate.
    • Stop reselling debts: EOS would be prohibited for five years from reselling the debts it buys to other debt collectors. This would protect consumers from the potential harm that results when debt collectors continue to sell and resell debts that may be inaccurate or lack the business records and information needed to collect them.
    • Pay civil money penalties: EOS would be required to pay a penalty of $1.85 million to the CFPB’s Civil Penalty Fund.

    CFPB action against Clarity Services

    Thursday, December 3rd, 2015

    Company Mishandled Consumer Reports, Failed to Investigate Consumer Disputes

    WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) took action against a nationwide credit reporting company, Clarity Services, Inc., and its owner, Tim Ranney, for illegally obtaining consumer credit reports. The company also violated the law by failing to appropriately investigate consumer disputes. The Bureau is ordering the company and its owner to halt their illegal practices and improve the way they investigate consumer disputes and obtain, sell, and resell consumer credit reports. The company and Ranney must also pay an $8 million penalty to the Bureau.

    “Credit reporting plays a critical role in consumers’ financial lives,” said CFPB Director Richard Cordray. “Clarity and its owner mishandled important consumer information and failed to take appropriate action to investigate consumer disputes. Today, we are holding them accountable for cleaning up the way they do business.”

    Clarity Services, Inc. is a Florida-based credit reporting company that focuses on the subprime market. Tim Ranney is the president, chief executive officer, and founder of the company. The company compiles and sells credit reports to financial service providers, such as payday lenders. Clarity purchases credit reports from other credit reporting companies, supplements these reports with alternative data, and resells the repackaged reports to be used in underwriting decisions. Companies that purchase Clarity’s consumer reports are often lenders making small-dollar loans to consumers who have thin credit files.

    The Fair Credit Reporting Act requires that access to consumer reports be limited to those with a “permissible purpose,” such as a lender making an underwriting decision about a consumer. Among other things, this protection helps to ensure that consumer reports are obtained and used appropriately and that consumer privacy rights are protected. When a lender requests to pull a credit report for a permissible use, the inquiry often appears on the consumer’s credit file.

    The CFPB found that Clarity and Ranney violated the Fair Credit Reporting Act by illegally obtaining the consumer reports of tens of thousands of consumers—without a permissible purpose—for use in marketing materials for potential clients. The company also failed to investigate consumer disputes, including consumer disputes about unauthorized credit inquiries. The specific violations include:

    • Illegally obtaining consumer reports without permission: Clarity and Ranney generated marketing materials for prospective clients by illegally obtaining tens of thousands of consumer reports from other credit reporting companies without a permissible purpose. Clarity and Ranney used personal consumer information from these reports to help market its products. For example, in one instance, although members of Clarity’s own staff objected to the illegal conduct, Clarity and Ranney illegally obtained over 190,000 consumer reports from another credit reporting company. As a result, consumers’ credit files wrongly reflected a permissible inquiry by a lender. When the lender learned of this and raised it with Clarity, Clarity and Ranney requested that the credit reporting companies delete evidence of the unauthorized pulls of information from the consumers’ reports.
    • Failing to investigate consumer credit reporting disputes: Clarity failed to investigate consumer disputes, including disputes relating to credit inquiries, even though it was aware that some consumer files were populated with information from unreliable sources. Specifically, the company would not investigate a dispute if a consumer did not supply supporting documents. Even when a consumer identified specific tradelines and the reason why the consumer thought the item was inaccurate or incomplete, Clarity would not reinvestigate unless the consumer provided specific documentation. Clarity also failed to investigate disputes related to identity theft and routinely failed to provide information to furnishers about consumer disputes.

    Enforcement Action
    Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions and individuals who violate the Fair Credit Reporting Act. Under the terms of the administrative order, Clarity and Ranney will be required to:

    • End illegal credit reporting practices: Clarity and Ranney must cease their illegal business practices. These illegal practices include pulling consumer reports and selling or reselling consumer reports to users who lack a legal purpose, such as lead generators and those companies that are considering purchasing any service from Clarity or Ranney.
    • Improve consumer safeguards: Clarity and Ranney must implement policies and procedures to ensure that users have a permissible purpose to obtain consumer reports and are appropriately credentialed. It must also require consumer data furnishers to provide accurate data and correct data inaccuracies.
    • Fully investigate consumer disputes: Among other things, Clarity and Ranney must improve the way the company investigates consumer disputes. As part of this, the company is required to have strong policies and procedures in place to ensure investigations are conducted when Clarity is informed of a consumer dispute, including disputes about unauthorized credit inquiries. The policies and procedures must also not impose any impermissible precondition to investigation, such as a requirement that a consumer must complete a specific form or provide documentation or other evidence of the dispute before Clarity will conduct an investigation.
    • Pay a civil monetary penalty of $8 million: Clarity and Ranney will pay an $8 million fine for the illegal actions.

    CARD Act

    Thursday, December 3rd, 2015

    Concerns Remain About Other Back-End Practices Such As Deferred-Interest Promotions

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today released a report detailing how the Credit Card Accountability Responsibility and Disclosure Act (CARD Act) has helped reduce the cost of “gotcha” credit card fees by more than $16 billion. Since the reform law, total costs to consumers have fallen with the elimination of certain back-end pricing practices such as over-limit fees. Over the same period, credit has generally become more available to consumers and the number of new accounts has grown faster than in almost every other major consumer credit market. Concerns remain, however, about other back-end practices such as deferred-interest promotions that can hit consumers with unexpected costs.

    “The CARD Act has helped people avoid more than $16 billion in gotcha credit card fees,” said CFPB Director Richard Cordray. “The law made it easier for consumers to evaluate costs and risks by eliminating the worst back-end pricing practices in the market. There is more work to do. But with commonsense rules in place, credit cards are safer and more affordable, credit is more available, and companies remain profitable with improved customer satisfaction.”

    More than 60 percent of adults own at least one credit card account. In the first six months of 2015, more than 14.5 billion credit card transactions accounted for more than $1.4 trillion in purchase volume. Before the CARD Act, widespread back-end pricing practices racked up costs for consumers through hidden fees and other gotchas. Signed into law in May 2009, the CARD Act created a fairer and more transparent market by protecting consumers against unexpected interest rate hikes, excessive late fees, and hard-to-avoid over-limit fees. The CFPB assumed authority for the CARD Act in July 2011.

    The CARD Act directs the CFPB to regularly review the credit card market and the impact of the law’s rules. This is the CFPB’s second report. Today’s report finds that, generally, consumers are paying less for their credit cards than they did before the law, and those costs are easier to predict before they are incurred. In addition, credit availability has continued to expand for consumers. Specifically, the report found that since the CARD Act:

    • Consumers have avoided more than $9 billion in over-limit fees: Before the CARD Act took effect, card issuers charged back-end fees that consumers might not discover until they owed the money. Card issuers could authorize transactions that put consumers over their credit limit and then charge a typical $35 over-limit fee. The CARD Act effectively eliminated these fees by requiring companies to get an affirmative opt-in from consumers to be charged for exceeding their credit limit. Had these fees continued at their pre-CARD Act level, consumers would have paid $9 billion more from the beginning of 2011 through to the end of 2014.
    • Consumers have saved more than $7 billion in late fees: The CARD Act also required that penalty fees, such as late fees, be “reasonable and proportional” to the relevant violation of account terms. Today’s report found that the average late fee has declined by 20 percent since the CARD Act. Had these fees continued at their pre-CARD Act level, consumers would have paid more than $7 billion from 2011 through 2014.
    • Total cost of credit is roughly 2 percentage points lower than before the CARD Act: The total cost of credit includes all fees and finance charges paid by the consumer to the card issuer. Today’s report, similarly to the CFPB’s 2013 report, found that the total cost of credit is almost 2 percentage points lower than it was prior to the enactment of the CARD Act.
    • Available credit has increased 10 percent since 2012: Today’s report found that credit card credit is increasingly available to consumers. In total, consumers have access to nearly $3.5 trillion in credit as of early 2015. This represents an increase of nearly $325 billion—or 10 percent—since early 2012.
    • More than 100 million credit card accounts were opened in 2014: New account volume is growing. This growth in account volume is outpacing population growth. For the last two years, annual growth in credit card accounts has been around 3 percent. The adult population in the U.S. has grown more slowly at around 1 percent.
    • More than 100 million credit card accounts offer consumers free access to their credit scores: Consumers’ credit scores are one of the key determinants of whether or not they will have access to credit. Unrelated to the CARD Act, in just the last few years, credit card issuers have responded to calls from the Bureau and other parts of the federal government to make their customers’ credit scores available. As of late this year, more than 100 million accounts now offer free access to the accountholder’s credit scores.

    Risky Practices Remain a Concern
    While the CARD Act addressed many problematic practices in the market, the CFPB has outstanding areas of concern from today’s report, including:

    • Deferred-interest promotions can hit consumers with back-end pricing: Deferred-interest promotions on credit cards dangle the possibility of financing purchases without interest. With these products, if the balance is not paid in full by a given date, the accumulated interest is assessed retroactively. Deferred-interest products remain the most glaring exception to the general post-CARD Act trend toward upfront credit card pricing. Consumers with lower credit scores are paying more for these products, but they do so at the back-end of the transaction, with annual interest rates of around 25 percent.
    • Subprime credit card companies charge much more for credit: When the credit is being provided by a subprime specialist credit card company, the total cost to consumers with lower credit scores can be much more than what they would pay on a mass market credit card. These companies charge more for origination and maintenance fees. This puts consumers at risk of more of their monthly payments going toward fees and interest charges, instead of the principal balance. Subprime companies also tend to have longer, more complicated agreements.
    • Rewards programs have obscure and incomplete terms and conditions: Over half of all consumers say they select credit cards based on the rewards they provide. But the terms of rewards programs are often not available to consumers until after they apply for the card. Even then, some rewards terms may be obscured by glossy “program guides” that provide only partial information. And if consumers were to find, read, and understand the terms, they would frequently discover that issuers retain the right to change those terms at any time, for any reason.
    • Debt collection practices pose risks to consumers: When consumers fall behind on their bills, their accounts are moved into collections. Initially, collections are generally handled in-house. There is a wide variation in how aggressively these collectors pursue the debts. After a while, accounts that have not been paid are often placed with third-party debt collectors that compete with other collectors and are paid a percentage of the debts they collect. Banks vary widely on the extent to which they rely on these third-party collectors and also on the extent to which they sell unpaid accounts to debt buyers. The Bureau has found numerous problems in the practices of many of these third-party collectors, including the accuracy and completeness of their information.
    • Some agreements are still long and complex: Today’s report identifies a number of opportunities for card issuers to improve the transparency of their products. For example agreements can still range in length from 3,000 to 8,000 words.