SE HABLA ESPAÑOL | MAP
312-739-4200
Contact Us

Contact Us

Archives

  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013

  • Areas & Topics

    Frquently Asked Questions

    Our Office Location

    Edelman, Combs, Latturner, & Goodwin, LLC

    20 South Clark Street
    Suite 1500
    Chicago, IL 60603

    info@edcombs.com
    Phone: 312-739-4200
    Fax: 312-419-0379


    E-mail Us  |  Chicago Law Office

    Edelman Combs Latturner Goodwin's facebook page   Edelman Combs Latturner Goodwin's Twitter Page   Edelman Combs Latturner Goodwin's Google Plus Page

    Archive

    FTC Action Halts Telemarketing Scheme That Pitched Money-Making Opportunities and Grants

    Friday, October 28th, 2016

    Defendants Claim Affiliation with Amazon.com and the Government

    The Federal Trade Commission has charged three individuals and five companies they control with bilking money from seniors, veterans, and debt-laden consumers by selling them a worthless money-making opportunity purportedly linked to Amazon.com, and luring them with a phony grants program.

    At the FTC’s request, a federal court has temporarily halted the operation. The agency seeks to end the alleged illegal practices and obtain money for return to consumers.

    According to the FTC’s complaint, the defendants’ telemarketers falsely tell people they represent Amazon and offer, for hundreds or thousands of dollars, to create a website for them linked to Amazon.com, claiming they will earn thousands of dollars every month in commissions for sales via the website. They also falsely offer to advertise the consumer’s website and use search engine optimization to drive customers to it.

    The defendants’ telemarketers allegedly also call people, often claiming to represent the government, and falsely tell them they can get government and corporate grants to help pay for home repairs, medical costs, and paying down debt. They ask for thousands of dollars up-front and falsely promise that consumers will receive grants worth tens of thousands of dollars within 90 days.

    According to the FTC, the defendants then tried to extract even larger payments from many of these same consumers using a tactic known as “reloading” – offering to sell them additional phony grants and typically promising that they can qualify for larger grants by forming a limited liability company.

    Consumers receive no money from these schemes, according to the FTC. Those who call the defendants to complain are ignored, and the defendants provide no refunds.

    The defendants are Blue Saguaro Marketing LLC, also doing business as Blue Saguaro Grant Program, Gera Grant, Government Grant Service, Grant Center, and Grant Resources; MarketingWays.com LLC, also d/b/a Amazon.com Associates Program; Max Results Marketing LLC, also d/b/a Amazon.com Associates Program, Amazon Affiliate Program, Amazon Associates Central, Gera Grant and, and Grant Strategy Solutions; Oro Canyon Marketing II LLC; Paramount Business Services LLC, also d/b/a Paramount Business Resources; Stephanie A. Bateluna; Stacey Vela; and Carl E. Morris, Jr. They are charged with violating the FTC Act and the Telemarketing Sales Rule.

    The FTC thanks the Phoenix Police Department and Office of the Arizona Attorney General for their important partnership in shutting down this blatant scam.

    The Commission vote approving the complaint was 3-0. The U.S. District Court for the District of Arizona entered a temporary restraining order against the defendants on October 11, 2016, and extended this order on October 25, 2016.

    NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

    scammers purporting to be from the IRS

    Thursday, October 27th, 2016

    Department of Justice
    Office of Public Affairs

    FOR IMMEDIATE RELEASE
    Thursday, October 27, 2016

    Dozens of Individuals Indicted in Multimillion-Dollar Indian Call Center Scam Targeting U.S. Victims

    Today, an indictment was unsealed charging a total of 61 individuals and entities for their alleged involvement in a transnational criminal organization that has victimized tens of thousands of persons in the United States through fraudulent schemes that have resulted in hundreds of millions of dollars in losses.  In connection with the scheme, 20 individuals were arrested today in the United States and 32 individuals and five call centers in India were charged for their alleged involvement.  An additional U.S.-based defendant is currently in the custody of immigration authorities.

    Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division, U.S. Attorney Kenneth Magidson of the Southern District of Texas, Executive Associate Director Peter T. Edge of U.S. Immigration and Customs Enforcement’s Homeland Security Investigations (HSI), Inspector General J. Russell George of the U.S. Treasury Inspector General for Tax Administration (TIGTA) and Inspector General John Roth of the U.S. Department of Homeland Security Office of Inspector General (DHS OIG) made the announcement today.

    “The indictment we unsealed and the arrests we made today demonstrate the Justice Department’s commitment to identifying and prosecuting the individuals behind these impersonation and telefraud schemes, who seek to profit by exploiting some of the most vulnerable members of our communities,”said Assistant Attorney General Caldwell.  “This is a transnational problem, and demonstrates that modern criminals target Americans both from inside our borders and from abroad.  Only by working tirelessly to gather evidence, build cases and working closely with foreign law enforcement partners to ensure there are no safe havens can we effectively address these threats.”

    “This indictment will serve to not only seek the conviction of those involved, but will send a message around the world that no one is safe from prosecution for participating in such pervasive transnational fraud schemes,” said U.S. Attorney Magidson.  “We are extremely vigilant when the names of U.S. government agencies are used to perpetuate fraud for the purpose of victimizing so many innocent American citizens.”

    “Today’s actions will not only bring a sense of justice to the victims in this case, but this significant investigation will also help increase awareness of this type of fraud,” said Executive Associate Director Edge.  “To potential victims, our message today is simple: U.S. government agencies do not make these types of calls, and if you receive one, contact law enforcement to report the suspected scam before you make a payment.”

    “All agencies involved in today’s announcement are to be congratulated and commended on their outstanding efforts,” said Inspector General George.  “This indictment is the result of countless hours of solid investigative work and excellent cross-governmental collaboration concerning massive amounts of fraud that individuals have allegedly perpetrated on the American people.”

    “This multi-agency, three year investigation illustrates the ability of federal, state and local agencies to successfully leverage resources, communicate and work together to achieve justice,” said Inspector General Roth.  “We commend the victims for overcoming any possible embarrassment or fear and coming forward and report this to the authorities.”

    The indictment was returned by a grand jury in the U.S. District Court for the Southern District of Texas on Oct. 19, 2016, and charges the defendants with conspiracy to commit identity theft, false personation of an officer of the United States, wire fraud and money laundering.  One of the defendants is separately charged with passport fraud.

    The indictment alleges that the defendants were involved in a sophisticated fraudulent scheme organized by conspirators in India, including a network of call centers in Ahmedabad, India.  Using information obtained from data brokers and other sources, call center operators allegedly called potential victims while impersonating officials from the Internal Revenue Service (IRS) or U.S. Citizenship and Immigration Services.  According to the indictment, the call center operators then threatened potential victims with arrest, imprisonment, fines or deportation if they did not pay taxes or penalties to the government.  If the victims agreed to pay, the call centers would then immediately turn to a network of U.S.-based co-conspirators to liquidate and launder the extorted funds as quickly as possible by purchasing prepaid debit cards or through wire transfers.  The prepaid debit cards were often registered using misappropriated personal identifying information of thousands of identity theft victims, and the wire transfers were directed by the criminal associates using fake names and fraudulent identifications.

    The co-conspirators allegedly used “hawalas,” in which money is transferred internationally outside of the formal banking system, to direct the extorted funds to accounts belonging to U.S.-based individuals.  According to the indictment, these individuals were expecting the hawala transfers but were not aware of the illicit nature of the funds.  The co-conspirators also allegedly kept a percentage of the proceeds for themselves.

    According to the indictment, one of the call centers extorted $12,300 from an 85-year-old victim from San Diego, California, after threatening her with arrest if she did not pay fictitious tax violations.  On the same day that she was extorted, one of the U.S.-based defendants allegedly used a reloadable debit card funded with the victim’s money to purchase money orders in Frisco, Texas.

    The indictment also alleges that the defendants extorted $136,000 from a victim in Hayward, California, who they called multiple times over a period of 20 days, fraudulently purporting to be IRS agents and demanding payment for alleged tax violations.  The victim was then directed to purchase 276 stored value cards which the defendants then transferred to reloadable debit cards.  Some of the victim’s money ended up on cards which were activated using stolen personal identifying information from U.S.- based victims.

    The conspirators would at times allegedly use alternative fraudulent schemes in which the call center operators would offer the victims small short-term loans or advise them that they were eligible for grants.  The indictment alleges that the conspirators would then request a good-faith deposit to show the victims’ ability to pay back the loan, or payment of a fee to process the grant.  The victims of the alleged scam never received any money after making the requested payment.

    An indictment is merely an allegation and the defendants are presumed innocent unless and until proven guilty beyond a reasonable doubt in a court of law.

    DHS OIG, HSI and TIGTA led the investigation.  The Ft. Bend, Texas, County Sheriff’s Department; the Hoffman Estates, Illinois, Police Department; the Leonia, New Jersey, Police Department; the Naperville, Illinois, Police Department; the San Diego County District Attorney’s Office Family Protection/Elder Abuse Unit; the U.S. Secret Service; U.S. Small Business Administration Office of Inspector General; IOC-2; INTERPOL Washington; and the U.S. Attorney’s Offices of the Northern District of Alabama, District of Arizona, Central District of California, Northern District of California, District of Colorado, Northern District of Florida, Middle District of Florida, Northern District of Illinois, Northern District of Indiana, District of Nevada and District of New Jersey provided significant support in this case.  The Federal Communications Commission’s Enforcement Bureau provided assistance in TIGTA’s investigation.

    Senior Trial Attorney Hope Olds and Trial Attorney Michael Sheckels of the Criminal Division’s Human Rights and Special Prosecutions Section, Trial Attorney Robert Stapleton of the Criminal Division’s Asset Forfeiture and Money Laundering Section and Assistant U.S. Attorneys S. Mark McIntyre and Craig Feazel of the Southern District of Texas are prosecuting the case.

    A Department of Justice website has been established to provide information about the case to already identified and potential victims, and the public.  Anyone who believes they may be a victim of fraud or identity theft in relation to this investigation or other telefraud scam phone calls may contact the FTC via this website.

    Anyone who wants additional information about telefraud scams generally, or preventing identity theft or fraudulent use of their identity information, may obtain helpful information on the IRS tax scams website, the FTC phone scam website and the FTC identity theft website.

    Midland Funding/ Midland Credit

    Saturday, October 15th, 2016

    Please contact us if Midland Funding / Midland Credit is trying to collect a Springleaf, OneMain Financial, Household, or Beneficial debt from you.

    FTC Obtains Court Orders Barring Skincare Marketers From Deceptive Marketing and Billing Practices

    Thursday, October 13th, 2016

    The defendants behind a group of California-based marketers have been permanently barred from the deceptive marketing and billing tactics they allegedly used to promote their skincare products, under court orders resolving Federal Trade Commission charges against them.

    Twenty-nine defendants who sold Auravie, Dellure, LéOR Skincare, and Miracle Face Kit branded skincare products have agreed to court orders with the FTC or had default orders entered against them.

    “These defendants tricked people into paying for skin care products and abused the credit card system to extend their scheme,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The Commission will continue to attack scams that rely on supposed ‘free trial’ offers and unauthorized credit card charges.”

    The agency’s original complaint, filed in June 2015, charged seven individuals and 15 companies with selling their skincare products through false advertisements for “risk-free trials.” According to the FTC, the defendants convinced consumers to provide their credit card information, purportedly to pay nominal shipping fees.

    However, the defendants allegedly used consumers’ credit card information to impose unauthorized recurring monthly charges of up to $97.88 per month for unordered products. The FTC also charged defendants with misrepresenting themselves as accredited by the Better Business Bureau (BBB).

    The Commission charged the defendants with violating the FTC Act, the Restore Online Shoppers’ Confidence Act, and the Electronic Funds Transfer Act. In October 2015, the FTC filed an amended complaint, adding eight corporate defendants, two individual defendants, and one corporate relief defendant to the case, which brought the total number of defendants to 33.

    Since May 2016, the Commission has approved five stipulated court orders, all of which have been entered by the Court. Additionally, the court has entered a default judgment and order against 19 corporate defendants. These orders have resolved the claims against all but four of the AuraVie defendants.

    Each final order bans the defendants from selling products through a “negative option,” in which the consumer’s silence is interpreted as consent to receive and pay for goods and services. The orders also bar them from future deception and credit card laundering.

    The stipulated orders entered against Paul Medina, Oz Mizrahi, Motti Nottea, Roi Reuveni, Alon Nottea, Doron Nottea, Igor Latsanovski, CalEnergy, Inc., Adageo, LLC, and Zen Mobile Media, Inc.and the default judgment and order entered against 19 corporate defendants include monetary judgments of more than $72.7 million. The stipulated order judgments are partially suspended based upon the defendants’ abilities to pay. The orders require these defendants to surrender virtually all of their assets to the FTC, totaling over $2.7 million.

    The Commission votes approving each stipulated final order were 3-0. The FTC filed the proposed orders in the U.S. District Court for the Central District of California. Litigation continues against: 1) Secured Merchants, LLC; 2) Kristopher Bond, also known as Ray Ibbot; 3) Alan Argaman, and 4) relief defendant Chargeback Armor, Inc.

    NOTE: Stipulated final orders and default judgments and orders have the force of law when approved and signed by the District Court judge.

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS NAVY FEDERAL CREDIT UNION TO PAY $28.5 MILLION FOR IMPROPER DEBT COLLECTION ACTIONS

    Tuesday, October 11th, 2016

    FOR IMMEDIATE RELEASE:
    October 11, 2016

     

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS NAVY FEDERAL CREDIT UNION TO PAY $28.5 MILLION FOR IMPROPER DEBT COLLECTION ACTIONS


    Credit Union Used False Threats to Collect Debts and Placed Unfair Restrictions on Account Access

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) took action against Navy Federal Credit Union for making false threats about debt collection to its members, which include active-duty military, retired servicemembers, and their families. The credit union also unfairly restricted account access when members had a delinquent loan. Navy Federal Credit Union is correcting its debt collection practices and will pay roughly $23 million in redress to victims along with a civil money penalty of $5.5 million.

    “Navy Federal Credit Union misled its members about its debt collection practices and froze consumers out from their own accounts,” said CFPB Director Richard Cordray. “Financial institutions have a right to collect money that is due to them, but they must comply with federal laws as they do so.”

    Navy Federal Credit Union is a federal credit union based in Vienna, Va. As a credit union, it offers a wide range of consumer financial products and services, including deposit accounts and loans. Membership in the credit union is limited to consumers who are, or have been, U.S. military servicemembers, Department of Defense civilian employees or contractors, government employees assigned to Department of Defense installations, and their immediate family members. It is the largest credit union in the country, with more than $73 billion in assets as of December 2015.

    The CFPB investigation found that Navy Federal Credit Union deceived consumers to get them to pay delinquent accounts. The credit union falsely threatened severe actions when, in fact, it seldom took such actions or did not have authorization to take them. The credit union also cut off members’ electronic access to their accounts and bank cards if they did not pay overdue loans. Hundreds of thousands of consumers were affected by these practices, which occurred between January 2013 and July 2015. The practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the CFPB found that Navy Federal Credit Union:

    • Falsely threatened legal action and wage garnishment: The credit union sent letters to members threatening to take legal action unless they made a payment. But in reality, it seldom took any such actions. The CFPB found that the credit union’s message to consumers of “pay or be sued” was inaccurate about 97 percent of the time, even among consumers who did not make a payment in response to the letters. The credit union’s representatives also called members with similar verbal threats of legal action. And the credit union threatened to garnish wages when it had no intention or authority to do so.
    • Falsely threatened to contact commanding officers to pressure servicemembers to repay: The credit union sent letters to dozens of servicemembers threatening that the credit union would contact their commanding officers if they did not promptly make a payment. The credit union’s representatives also communicated these threats by telephone. For members of the military, consumer credit problems can result in disciplinary proceedings or lead to revocation of a security clearance. The credit union was not authorized and did not intend to contact the servicemembers’ chains of command about the debts it was attempting to collect.
    • Misrepresented credit consequences of falling behind on a loan: The credit union sent about 68,000 letters to members misrepresenting the credit consequences of falling behind on a Navy Federal Credit Union loan. Many of the letters said that consumers would find it “difficult, if not impossible” to obtain additional credit because they were behind on their loan. But the credit union had no basis for that claim, as it did not review consumer credit files before sending the letters. The credit union also misrepresented its influence on a consumer’s credit rating, implying that it could raise or lower the rating or affect a consumer’s access to credit. As a furnisher, the credit union could supply information to the credit reporting companies but it could not determine a consumer’s credit score.
    • Illegally froze members’ access to their accounts: The credit union froze electronic account access and disabled electronic services for about 700,000 accounts after consumers became delinquent on a Navy Federal Credit Union credit product. This meant delinquency on a loan could shut down a consumer’s debit card, ATM, and online access to the consumer’s checking account. The only account actions consumers could take online would be to make payments on delinquent or overdrawn accounts.

    Enforcement Action
    Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair or deceptive acts or practices or that otherwise violate federal consumer financial laws. Under the terms of the order, Navy Federal Credit Union is required to:

    • Pay victims $23 million: The credit union is required to pay roughly $23 million in compensation to consumers who received threatening letters. Most will be eligible for redress if they received one of the deceptive debt collection letters and they made a payment to the credit union within 60 days of that letter. In addition, all consumers who received the letter threatening to contact their commanding officer will receive at least $1,000 in compensation. The credit union will contact consumers who are eligible for compensation.
    • Correct debt collection practices: The credit union must create a comprehensive plan to address how it communicates with its members about overdue debt. This includes refraining from any misleading, false, or unsubstantiated threats to contact a consumer’s commanding officer, threats to initiate legal action, or misrepresentations about the credit consequences of falling behind on a Navy Federal Credit Union loan.
    • Ensure consumer account access: Navy Federal Credit Union cannot block its members from accessing all their accounts if they are delinquent on one or more accounts. The credit union must implement proper procedures for electronic account restrictions.
    • Pay a $5.5 million civil money penalty: Navy Federal Credit Union is required to pay a penalty of $5.5 million to the CFPB’s Civil Penalty Fund.

    The Navy Federal Credit Union consent order can be found at: http://files.consumerfinance.gov/f/documents/102016_cfpb_NavyFederalConsentOrder.pdf

    The CFPB advises all servicemembers to know their rights when a debt collector calls. They should know that a debt collector can’t tell their chain of command that they owe a debt, threaten them with prosecution under the Uniform Code of Military Justice, or threaten to revoke their security clearance. More information, including how to access sample letters to respond to a debt collector, is available at: http://files.consumerfinance.gov/f/CFPB-Servicemembers-Know-Your-Rights-Handout-Debt-Collection.pdf

     

    Explanation of CFPB prepaid card rule

    Tuesday, October 11th, 2016

    October 5, 2016

    CONTACT:
    Office of Communications
    Tel: (202) 435-7170

    Prepared Remarks of Richard Cordray
    Director of the Consumer Financial Protection Bureau

    Prepaid Accounts Rule Press Call

    Washington, D.C.

    Thank you for joining us on this call. The Consumer Financial Protection Bureau today has finalized a new rule providing strong federal consumer protections for prepaid account users.

    Prepaid accounts are among the fastest growing consumer financial products in the United States. One common form is the “general purpose reloadable” card, easily available at any number of stores or online. Consumers can load money onto these cards and use them for everyday purchases, just as they do with a bank account and a debit card. Prepaid accounts may also be loaded with funds by a third party, such as an employer.

    The amount consumers put on general purpose reloadable cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. And the total value loaded onto them is expected to nearly double to $112 billion by 2018. These accounts can be used to make payments, store funds, withdraw cash at ATMs, receive direct deposits, or send money to others. This market also includes a growing number of mobile or electronic prepaid accounts, such as PayPal or Google Wallet, which can also be used for a wide range of transactions.

    Before today, however, many of these products lacked strong consumer protections under federal law. Our new rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone. Among the key new requirements that financial institutions must meet are these: (1) they must limit consumer losses when funds are stolen or cards are lost; (2) they must investigate and resolve errors that occur; and (3) they must give consumers free and easy access to their account information. The Bureau also has finalized new “Know Before You Owe” disclosures for prepaid accounts that give consumers the clear information they need, up front, about the fees they can be charged and other key details.

    In addition to these requirements governing prepaid accounts, financial institutions must offer protections similar to those for credit cards if they allow a prepaid account to be used to access certain credit extended by the institution, its affiliates, or its business partners. These protections would apply when a prepaid card can be used to cover a transaction even though the account lacks sufficient funds, with certain exceptions.

    The new rule applies to traditional prepaid cards, as well as mobile wallets, person-to-person payment products, and other electronic accounts that can store funds. The rule also covers: payroll cards; student financial aid disbursement cards; tax refund cards; and certain federal, state, and local government benefit cards, such as those used to distribute social security benefits and unemployment insurance.

    Many of these important protections stem from the Electronic Fund Transfer Act, and they are intended to be similar to those for checking account consumers. For instance, error resolution rights will now be similar for both types of accounts. If consumers are hit with what they believe are unauthorized or fraudulent charges, their financial institution must investigate and resolve these incidents in a timely way. Where it turns out to be appropriate, they must restore the missing funds. Consumers will also now generally have limited liability for any withdrawals, purchases, or other transactions made on a lost or stolen prepaid card.

    The new disclosures specified in the rule will give consumers easy-to-understand information about prepaid accounts right up front. Currently, some information is hard to find online or is not revealed until you open the packaging, which makes it hard to comparison shop. So the new rule sets an industry-wide standard on fee disclosures for prepaid accounts. This will simplify, organize, and present key information consistently so people can easily understand and act on it. This is much like the approach we have taken with “Know Before You Owe” disclosure forms for mortgages.

    A separate part of the rule provides strong credit-related protections that stem from the Truth in Lending Act. These protections are for consumers who want the option to access credit in the course of conducting transactions with their prepaid cards so that they can spend more money than they have in the prepaid account. In situations where prepaid users are accessing credit within a transaction that is offered by the issuer, its affiliate, or its business partner, they must receive protections similar to those afforded to credit card users under federal law. These protections include underwriting requirements, detailed periodic statements, limitations on late fees and charges, and restrictions on the amount of fees that can be imposed in the first year that the credit is extended. To further separate prepaid accounts and any credit feature that is offered, companies must observe a 30-day waiting period before offering such credit to newly registered prepaid consumers.

    The new prepaid rule will generally apply to prepaid accounts starting in October 2017. To make it easier to comparison shop among different products, prepaid account issuers must publicly post agreements for accounts they offer to the general public on their websites. They must also generally submit all their agreements to the Bureau, for posting on our website, starting in October 2018.

    These important new protections fill gaps in the law for consumers. The rapidly growing ranks of prepaid users deserve a safe place to store their money and a practical way to carry out their financial transactions. And though many prepaid companies already offer some of these same protections to their customers, it is vital for all consumers to have the settled assurance that these protections are now the law of the land. Thank you.

    #

    CONSUMER FINANCIAL PROTECTION BUREAU FINALIZES STRONG FEDERAL PROTECTIONS FOR PREPAID ACCOUNT CONSUMERS

    Wednesday, October 5th, 2016

    October 4, 2016

    CONTACT:
    Office of Communications
    Tel: (202) 435-7170

    CONSUMER FINANCIAL PROTECTION BUREAU FINALIZES STRONG FEDERAL PROTECTIONS FOR PREPAID ACCOUNT CONSUMERS
    New Rule Includes ‘Know Before You Owe’ Prepaid Disclosures

    WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today finalized strong federal consumer protections for prepaid account users. The new rule requires financial institutions to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, and give consumers free and easy access to account information. The Bureau also finalized new “Know Before You Owe” disclosures for prepaid accounts to give consumers clear, upfront information about fees and other key details. Finally, prepaid companies must now generally offer protections similar to those for credit cards if consumers are allowed to use credit on their accounts to pay for transactions that they lack the money to cover.

    “Many consumers rely on prepaid cards to make purchases and access funds, but until now they were not guaranteed strong consumer protections under federal law,” said CFPB Director Richard Cordray. “This rule closes loopholes and protects prepaid consumers when they swipe their card, shop online, or scan their smartphone. And it backs up those protections with important new disclosures to let consumers know before they owe.”

    Prepaid accounts are among the fastest growing consumer financial products in the United States, usually purchased at retail outlets or online. The amount consumers put on “general purpose reloadable” prepaid cards grew from less than $1 billion in 2003 to nearly $65 billion in 2012. The total dollar value loaded onto these prepaid cards is expected to nearly double to $121 billion by 2018. Prepaid accounts may be loaded with funds by a consumer or by a third party, such as an employer. Consumers generally can use these accounts to make payments, store funds, withdraw cash at ATMs, receive direct deposits, or send money to others.

    The new rule applies specific federal consumer protections to broad swaths of the prepaid market for the first time. It covers traditional prepaid cards, including general purpose reloadable cards. It also applies to mobile wallets, person-to-person payment products, and other electronic prepaid accounts that can store funds. Other prepaid accounts covered by the new rule include: payroll cards; student financial aid disbursement cards; tax refund cards; and certain federal, state, and local government benefit cards such as those used to distribute unemployment insurance and child support.

    Prepaid Protections
    For many consumers, prepaid accounts are an alternative to traditional checking accounts, but until now they had only limited federal protections. The new rule gives prepaid account consumers important protections under the Electronic Fund Transfer Act, which are similar to those for checking account consumers. They include:

    • Free and easy access to account information: Financial institutions must make certain account information available for free by telephone, online, and in writing upon request, unless they provide periodic statements. Unlike checking account customers, prepaid consumers typically do not receive periodic statements by mail. The rule ensures that consumers have access to their account balances, their transaction history, and the fees they’ve been charged.
    • Error resolution rights: Financial institutions must cooperate with consumers who find unauthorized or fraudulent charges, or other errors, on their accounts to investigate and resolve these incidents in a timely way, and where appropriate, restore missing funds. If the financial institution cannot do so within a certain period of time, it will generally be required to provisionally credit the disputed amount to the consumer while it finishes its investigation.
    • Protections for lost cards and unauthorized transactions: The new rule protects consumers against withdrawals, purchases, or other unauthorized transactions if their prepaid cards are lost or stolen. The rule limits consumers’ liability for unauthorized charges and creates a timely way for them to get their money back. As long as the consumer promptly notifies their financial institution, the consumer’s responsibility for unauthorized charges will be limited to $50.

    Know Before You Owe: Prepaid Disclosures
    The Bureau’s new rule includes new “Know Before You Owe” prepaid disclosures which provide consumers with standard, easy-to-understand, upfront information about prepaid accounts. Consumers cannot always tell what fees apply to prepaid accounts before purchasing or signing up for them because the disclosures may be inside the packaging or hard to find online. This can make it difficult to comparison shop and make well-informed decisions. The new rule sets an industry-wide standard on fee disclosures for prepaid accounts. This follows the tradition of the Bureau’s “Know Before You Owe” disclosure forms for mortgages and student financial aid offers. These disclosures simplify, organize, and present information in a way the consumer can easily understand and act upon. Under the new rule, prepaid consumers will have access to:

    • Standard, easy-to-understand, upfront information: The CFPB rule requires two forms, one short and one long, with easy-to-understand disclosures. The short form concisely and clearly highlights key prepaid account information, including the fees the CFPB believes are most important to consumers shopping for a prepaid account. These include a periodic fee, per purchase fee, ATM withdrawal and balance inquiry fees, cash reload fee, customer service fees, and inactivity fee. The short form also must disclose certain information about additional types of fees that the consumer may be charged. Consumers will also get or be able to access the comprehensive long form disclosure containing a complete list of fees and certain other key information before acquiring the account.
    • Publicly available card agreements: To make comparison shopping easier, the rule requires prepaid account issuers to post on their websites the prepaid account agreements they offer to the general public. Additionally, with a few exceptions, issuers must submit all agreements to the CFPB, which intends to post them on a public, Bureau-maintained website at a future date. Also, issuers must make any agreement not required to be posted on their website available to applicable consumers.

    Examples of the disclosures can be found here: http://files.consumerfinance.gov/f/documents/102016_cfpb_KBYO_PrepaidDisclosures.pdf

    Credit Protections
    The new rule includes strong protections for consumers using credit products that allow them the option of spending more money than they have deposited into the prepaid account. Under the rule, prepaid issuers must give consumers protections similar to those on credit cards if consumers are allowed to use certain linked credit products to pay transactions that their prepaid funds would not fully cover. These protections stem mainly from the Truth in Lending Act and the Credit Card Accountability Responsibility and Disclosure Act (CARD Act). Protections that apply to such prepaid credit products include:

    • Ability to pay: Prepaid companies, like credit card issuers, must make sure consumers have the ability to repay the debt before offering credit. The new rule states that companies cannot open a credit card account or increase a credit line related to a prepaid card unless they consider the consumer’s ability to make required payments. For consumers under 21, the companies will be required to assess these consumers’ independent ability to repay.
    • Monthly credit billing statement: Prepaid companies have to give consumers regular statements like those credit card consumers receive. This statement will detail fees, and if applicable, the interest rate, what they have borrowed, how much they owe, and other key information about repaying the debt.
    • Reasonable time to pay and limits on late fees: Prepaid companies, like credit card issuers, will be required to give consumers at least 21 days to repay their debt before they are charged a late fee. Late fees must also be “reasonable and proportional” to the violation of the account terms in question.
    • Limited fee and interest charges: During the first year a credit account is open, total fees for credit features cannot exceed 25 percent of the credit limit. Generally, card issuers cannot hike the interest rate on an existing balance unless the cardholder has missed back-to-back payments. Card issuers may raise the interest rate in advance of new purchases, but generally must give the consumer 45 days advance notice, during which time the consumer may cancel the credit account.

    The CFPB rule includes other protections to ensure that the prepaid account and the credit feature described above are distinct, such as a:

    • Thirty-day waiting period: The CFPB rule requires companies to wait 30 days after a consumer registers the prepaid account before offering the credit feature to the consumer. This gives consumers time to gain experience with the basic prepaid account before deciding if they want to apply for the credit feature.
    • Wall between prepaid funds and credit repayment: Prepaid companies cannot automatically seize a credit repayment the next time a prepaid account is loaded with funds. Further, prepaid companies cannot automatically take funds from the prepaid account to repay the credit when the bill is due unless the consumer consents. And even so, companies cannot automatically take funds more than once per month. Payment also cannot be required until 21 days after the statement is mailed.

    The new rule will generally apply to prepaid accounts starting Oct. 1, 2017, though the requirement for submitting agreements to the Bureau takes effect in October 2018. The final rule includes other accommodations in certain situations.

    For a copy of the rule: http://files.consumerfinance.gov/f/documents/20161005_cfpb_Final_Rule_Prepaid_Accounts.pdf

    For prepaid rule-related documents: http://www.consumerfinance.gov/prepaid-rule

    To view a CFPB video with highlights of the rule: https://youtu.be/JPTg8ZB3j5c

     

    U.S. Court Finds in FTC’s Favor and Imposes Record $1.3 Billion Judgment Against Defendants Behind AMG Payday Lending Schem

    Tuesday, October 4th, 2016

    U.S. Court Finds in FTC’s Favor and Imposes Record $1.3 Billion Judgment Against Defendants Behind AMG Payday Lending Scheme

    FOR RELEASE

    At the request of the Federal Trade Commission, a federal court has found that racecar driver Scott A. Tucker and several corporate defendants in a Kansas City-based payday lending scheme violated Section 5 of the FTC Act and has ordered them to pay $1.3 billion for deceiving consumers across the country and illegally charging them undisclosed and inflated fees.

    “This significant court judgment demonstrates the FTC’s determination to crack down on deceptive payday lenders and the people who run them,” FTC Chairwoman Edith Ramirez said. “No consumer should be victimized by an unlawful scheme like this one, and it is especially detestable when those who can least afford to be charged undisclosed and inflated fees are the ones being targeted.”

    The $1.3 billion order handed down by the U.S. District Court for the District of Nevada represents the largest litigated judgment ever obtained by the FTC. It stems from a complaint filed in 2012 by the agency, which alleged that the operators of AMG Services Inc. falsely claimed they would charge borrowers the loan amount plus a one-time finance fee. Instead, the defendants made multiple withdrawals from consumers’ bank accounts and assessed a new finance fee each time, without disclosing the true costs of the loan. The judgment represents the difference between what consumers actually paid on the loans and what they were told they would have to pay.

    In her latest ruling granting the FTC’s request for summary judgment against the defendants, Chief Judge Gloria M. Navarro found that Scott Tucker ran the operation and was individually responsible for the unlawful conduct. The order announced today bans Tucker and his companies, including AMG Capital Management LLC, Level 5 Motorsports LLC, Black Creek Capital Corporation, and Broadmoor Capital Partners, from any aspect of consumer lending, and prohibits them from conditioning the extension of credit on preauthorized electronic fund transfers, misrepresenting material facts about any good or service, and engaging in illegal debt collection practices.

    The operation had claimed in state legal proceedings that it was affiliated with Native American tribes, and therefore immune from legal action, but, in an earlier decision, the district judge found otherwise.

    The FTC reached a partial settlement with some of the other defendants in July 2013. In January 2015, AMG Services and MNE Services Inc. agreed to pay $21 million to resolve the charges against them; and in January 2016, Red Cedar Services Inc. and SFS Inc. paid a total of $4.4 million to resolve the case against them.

    For information about FTC’s AMG Services refund program, sign up here to get updates by email.

    The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357).  Like the FTC on Facebook(link is external), follow us on Twitter(link is external), read our blogs and subscribe to press releases for the latest FTC news and resources.

    FDA warns against the use of homeopathic teething tablets and gels

    Sunday, October 2nd, 2016

    FDA warns against the use of homeopathic teething tablets and gels

    SILVER SPRING, Md., Sept. 30, 2016 /PRNewswire-USNewswire/ — The U.S. Food and Drug Administration is warning consumers that homeopathic teething tablets and gels may pose a risk to infants and children. The FDA recommends that consumers stop using these products and dispose of any in their possession.

    Homeopathic teething tablets and gels are distributed by CVS, Hyland’s, and possibly others, and are sold in retail stores and online.

    Consumers should seek medical care immediately if their child experiences seizures, difficulty breathing, lethargy, excessive sleepiness, muscle weakness, skin flushing, constipation, difficulty urinating, or agitation after using homeopathic teething tablets or gels.

    “Teething can be managed without prescription or over-the-counter remedies,” said Janet Woodcock, M.D., director of the FDA’s Center for Drug Evaluation and Research. “We recommend parents and caregivers not give homeopathic teething tablets and gels to children and seek advice from their health care professional for safe alternatives.”

    The FDA is analyzing adverse events reported to the agency regarding homeopathic teething tablets and gels, including seizures in infants and children who were given these products, since a 2010 safety alert about homeopathic teething tablets. The FDA is currently investigating this issue, including testing product samples. The agency will continue to communicate with the public as more information is available.

    Homeopathic teething tablets and gels have not been evaluated or approved by the FDA for safety or efficacy. The agency is also not aware of any proven health benefit of the products, which are labeled to relieve teething symptoms in children.

    The FDA encourages health care professionals and consumers to report adverse events or quality problems experienced with the use of homeopathic teething tablets or gels to the FDA’s MedWatch Adverse Event Reporting program:

    The FDA, an agency within the U.S. Department of Health and Human Services, protects the public health by assuring the safety, effectiveness, security of human and veterinary drugs, vaccines and other biological products for human use, and medical devices. The agency is also responsible for the safety and security of our nation’s food supply, cosmetics, dietary supplements, products that give off electronic radiation, and for regulating tobacco products.

    Media Inquiries: Lyndsay Meyer, lyndsay.meyer@fda.hhs.gov, 240-402-5345
    Consumer Inquiries: 888-INFO-FD