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    BIRCH COMMUNICATIONS TO PAY $6.1 MILLION TO SETTLE INVESTIGATION INTO DECEPTIVE MARKETING AND BILLING PRACTICES

    Friday, December 30th, 2016

    For Immediate Release
    BIRCH COMMUNICATIONS TO PAY $6.1 MILLION TO SETTLE
    INVESTIGATION INTO DECEPTIVE MARKETING AND BILLING
    PRACTICES
    Customers will receive at least $1.9 million in refunds as part of the settlement
    WASHINGTON, December 29, 2016 – The Federal Communications Commission today announced a
    settlement with Birch Communications that resolves an Enforcement Bureau investigation into whether
    the company engaged in deceptive and abusive marketing practices.

    Specifically, the investigation concerned whether Birch “slammed” consumers by switching their
    preferred phone carriers without authorization, “crammed” unauthorized charges on its customers’ bills
    and engaged in deceptive marketing. Abusive practices, like “cramming” and “slamming,” result in
    telephone consumers paying for unauthorized services and expending significant time and effort to seek
    to reverse charges and services they never requested. Under the terms of the settlement, Birch will pay a
    $4.2 million penalty, refund at least $1.9 million to consumers who filed complaints about unauthorized
    carrier changes or unauthorized charges within the past two years and adopt a compliance plan.
    “Consumers have a right to expect honest talk and fair dealing from any phone company,” said
    Enforcement Bureau Chief Travis LeBlanc. “It is plainly unacceptable for any carrier to misrepresent its
    identity or purpose in order to mislead consumers into switching their preferred provider and to add
    unauthorized charges to consumer bills. Today’s settlement ensures that all of Birch’s customers will
    enjoy greater protections and that those who were unlawfully charged will get their money back.”
    Birch is headquartered in Atlanta, Georgia. The Bureau launched the investigation in 2015 after
    reviewing hundreds of consumer complaints filed with the FCC, state regulatory authorities and the Better
    Business Bureau. The Bureau’s investigation found that Birch’s telemarketers repeatedly misrepresented
    their identity and the purpose of their telemarketing calls when contacting potential customers, including
    claiming to be affiliated with the consumers’ own carriers, in order to fraudulently switch consumers to
    Birch’s service and place unwanted charges on their bills. In many cases, Birch assessed substantial early
    termination fees against consumers when they cancelled the unauthorized and unwanted service.
    Consumers, including small businesses and law offices, spent a considerable amount of time and effort
    trying to return to their preferred carriers and restore the services they had before the unauthorized
    switches.
    In addition to the $4.2 million fine and the $1.9 million in consumer refunds, the settlement requires
    Birch to record all sales calls, verify any changes to a consumer’s preferred carrier, provide enhanced
    customer notice about early termination fees, promptly investigate consumer complaints about
    unauthorized charges and carrier changes, designate a senior corporate manager as a compliance officer,
    and file compliance reports with the Bureau for five years.

    Slamming and cramming are “unjust and unreasonable” practices prohibited by the Communications Act.
    In the last five years, the Commission has taken more than 30 enforcement actions against carriers for
    cramming and slamming, totaling more than $360 million in proposed penalties and payments to the U.S.
    Treasury.

    For more information about the FCC’s rules protecting consumers from unauthorized charges on
    telephone bills, see the FCC consumer guides regarding cramming at
    https://www.fcc.gov/consumers/guides/cramming-unauthorized-charges-your-phone-bill and slamming at
    https://www.fcc.gov/consumers/guides/slamming-switching-your-authorized-telephone-company-
    without-permission.

    To file a complaint with the FCC, go to https://consumercomplaints.fcc.gov/hc/en-us or contact the
    FCC’s Consumer Center by calling 1-888-CALL-FCC (1-888-225-5322) voice or 1-888-TELL-FCC (1-
    888-835-5322) TTY; faxing 1-866-418-0232; or by writing to:

    Federal Communications Commission
    Consumer and Governmental Affairs Bureau
    Consumer Inquiries and Complaints Division
    445 12th Street, SW
    Washington, DC 20554

    The Consent Decree is available at: https://apps.fcc.gov/edocs_public/attachmatch/DA-16-1458A1.pdf.
    ###
    Office of Media Relations: (202) 418-0500
    TTY: (888) 835-5322
    Twitter: @FCC
    www.fcc.gov/office-media-relations

    CONSUMER FINANCIAL PROTECTION BUREAU MONTHLY COMPLAINT SNAPSHOT SPOTLIGHTS DEBT COLLECTION COMPLAINTS

    Tuesday, December 27th, 2016

    FOR IMMEDIATE RELEASE:
    December 27, 2016

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

    CONSUMER FINANCIAL PROTECTION BUREAU MONTHLY COMPLAINT SNAPSHOT SPOTLIGHTS DEBT COLLECTION COMPLAINTS

    Report Also Looks at Consumer Complaints from Arizona

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) released a monthly complaint snapshot highlighting consumer complaints about debt collection. The report shows that the most common complaint about debt collection has to do with attempts to collect on a debt that the consumer says is not owed. This month’s report also highlights trends seen in complaints coming from Arizona. As of Dec. 1, 2016 the Bureau has handled approximately 1,058,100 complaints across all products.

    “Today’s report shows that consumers continue to report being harassed about debts they already repaid or debts they do not owe,” said CFPB Director Richard Cordray. “The Bureau will continue to work to ensure that consumers are not being wrongly pursued by debt collectors.”

    The Monthly Complaint Report can be found at: http://files.consumerfinance.gov/f/documents/201612_cfpb_MonthlyComplaintReport.pdf

    Category Spotlight: Debt Collection
    Since the Bureau began accepting complaints in 2011, debt collection has been the most-complained-about financial product or service by over 100,000 complaints compared to the next most-complained-about product. As of Dec. 1, 2016, the Bureau had handled approximately 285,000 debt collection complaints. Some of the findings in the snapshot include:

    • Consumers report being contacted for debts not owed: Over a third—39 percent—of complaints submitted about debt collection had to do with consumers reporting being contacted about debts that they no longer owed.  Many consumers complained they were never provided documentation to verify the debt, even after submitting requests for verification.
    • Accounts forwarded to third-party collectors without notice: Consumers complained that their accounts were forwarded to third-party collectors without receiving any prior notice from the original debt holder about an outstanding balance. Some of these consumers also complained that their accounts were not in delinquent status prior to contact by the third-party collectors.
    • Consumers complain about being bothered by frequent and repeated calls: Many consumers complained that they are subject to frequent daily calls by debt collectors both at home and at work, even after informing the collector that contact at work was prohibited by their employer.
    • Most-complained-about debt collection companies: The three companies that the Bureau has received the most average monthly complaints about are Portfolio Recovery Associates, Inc., Encore Capital Group, and ERC.

    National Complaint Overview
    As of Dec. 1, 2016 the CFPB has handled approximately 1,058,100 complaints nationally. Some of the findings from the statistics being published in this month’s snapshot report include:

    • Complaint volume: For November 2016, debt collection was the most-complained-about financial product or service. Of the approximately 23,000 complaints handled in November, there were 6,730 complaints about debt collection. The second most-complained-about consumer product was credit reporting, which accounted for 4,138 complaints. The third most-complained-about financial product or service was mortgages, accounting for 3,954 complaints.
    • Product trends: In a year-to-year comparison examining the three-month time period of September to November, prepaid product complaints showed the greatest decrease—59 percent—of any product or service. The Bureau received 183 prepaid product complaints between September and November 2016, while it received 444 complaints during the same time period in 2015. 
    • State information: Iowa, Georgia, and Alaska experienced the greatest year-to-year complaint volume increases from September to November 2016 period versus the same time period 12 months before. Iowa was up 39 percent, Georgia was up 37 percent, and Alaska was up 35 percent.
    • Most-complained-about companies: The top three companies that received the most complaints from July through September 2016 were credit reporting companies Equifax, Experian, and TransUnion.

    Geographic Spotlight: Arizona
    This month, the CFPB highlighted complaints from Arizona and the Phoenix metro area.  As of Dec. 1, 2016, consumers in Arizona have submitted 23,300 of the 1,058,100 complaints the CFPB has handled, with 15,000 of them coming from the Phoenix metro area. Findings from the Arizona complaints include:

    • Debt collection is the most-complained-about product or service: Consumers in Arizona most often submitted complaints about debt collection. Debt collection complaints accounted for 29 percent of the complaints submitted to the Bureau by consumers from Arizona, while nationally debt collection complaints account for 27 percent of complaints. 
    • Rate of mortgage-related complaints nearly equal to the national rate: Complaints related to mortgages accounted for 25 percent of all complaints submitted by consumers from Arizona. This is nearly identical to the rate of 24 percent at which consumers nationally submit mortgage complaints to the CFPB. 
    • Most-complained-about companies: In the October 2015 to September 2016 time period, the three most complained about companies by consumers from Arizona were Equifax, Experian, and Wells Fargo.

    The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established consumer complaint handling as an integral part of the CFPB’s work. The CFPB began accepting complaints as soon as it opened its doors in July 2011. It currently accepts complaints on many consumer financial products, including credit cards, mortgages, bank accounts and services, private student loans, vehicle and other consumer loans, credit reporting, money transfers, debt collection, and payday loans.

    In June 2012, the CFPB launched its Consumer Complaint Database, which is the nation’s largest public collection of consumer financial complaints. When consumers submit a complaint they have the option to share publicly their explanation of what happened. For more individual-level complaint data and to read consumers’ experiences, visit the Consumer Complaint Database at: www.consumerfinance.gov/complaintdatabase/.

    Company-level complaint data in the report uses a three-month rolling average of complaints sent by the Bureau to companies for response. This data lags other complaint data in this report by two months to reflect the 60 days companies have to respond to complaints, confirming a commercial relationship with the consumer. Company-level information should be considered in the context of company size.

    To submit a complaint, consumers can:

    • Go online at www.consumerfinance.gov/complaint/
    • Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
    • Fax the CFPB at 1-855-237-2392
    • Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
    • Additionally, through “Ask CFPB,” consumers can get clear, unbiased answers to their questions at consumerfinance.gov/askcfpb or by calling 1-855-411-CFPB (2372).

     

    Telemarketing Defendants Charged by FTC in Tech Support Scheme Will Pay $10 Million for Consumer Redress

    Friday, December 23rd, 2016

    The defendants who operated a Florida-based tech support scheme that the Federal Trade Commission and State of Florida charged deceived thousands of consumers, will pay $10 million for consumer redress to settle the action.

    According to the complaint, defendant Inbound Call Experts, doing business as Advanced Tech Support along with other defendants, used high-pressure sales pitches to telemarket tech support products and services falsely claiming to find viruses and malware on consumers’ computers.

    The stipulated final court order prohibits the defendants from misrepresenting that they have identified performance or security issues on consumers’ computers and from making any other misrepresentations while selling a product or service. Under the order, a federal judge will appoint a monitor to oversee the defendants’ business for two years, at the defendants’ expense. In addition, the order requires the defendants to review the business practices of any third-party lead generators from whom they get leads.

    To fund the $10 million redress judgment, the order requires the defendants to transfer $5.75 million of their assets held in escrow by their attorneys to the FTC within 7 days after the order is signed by the judge, and to transfer an additional $2.25 million within 30 days. In addition, the court-appointed receiver will promptly transfer another $2 million of defendants’ assets to the FTC.

    A negotiated settlement with the lead generator defendants in this action was announced in July 2016. The stipulated order announced today against the telemarketing defendants resolves the case.

    In addition to Inbound Call Experts, the telemarketing defendants include Advanced Tech Supportco LLC; PC Vitalware LLC; Super PC Support LLC; Robert D. Deignan, Paul M. Herdsman and Justin M. Wright.

    The Commission vote approving the stipulated final order was 3-0. The FTC filed the proposed order in the U.S. District Court for the Southern District of Florida, and it was entered by the judge on December 19, 2016.

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

    CFPB action against Moneytree

    Friday, December 16th, 2016

    Today, the Consumer Financial Protection Bureau (CFPB) took action against Moneytree, Inc., a financial services company that offers payday loans and check-cashing services, for misleading consumers with deceptive online advertisements and collections letters. The company also made unauthorized electronic transfers from consumers’ bank accounts. The CFPB has ordered the company to cease its illegal conduct, provide $255,000 in refunds to consumers, and pay a civil penalty of $250,000.

    “Consumers deserve honesty and transparency from the financial institutions they rely on,” said CFPB Director Richard Cordray. “Moneytree’s practices meant consumers were making decisions based on false and deceptive information, and today’s action will give the company’s customers the redress they are owed.”

    Moneytree, Inc., is a financial services company based in Seattle, Wash. It offers payday loans, check-cashing, and other services to consumers. The CFPB has conducted multiple supervisory examinations of Moneytree’s lending, marketing, and collections activities and has identified significant weaknesses in the company’s compliance-management system in each of them. The CFPB found in today’s order that the company had failed to address those weaknesses and deceived consumers about the price of check-cashing services, made false threats of vehicle repossession when collecting overdue unsecured loans, and withdrew funds from consumers’ accounts without written authorization.

    The full text of today’s order is available at: http://files.consumerfinance.gov/f/documents/201612_cfpb_Moneytree-consentorder.pdf

    Thank you,

    Office of Community Affairs
    Consumer Financial Protection Bureau

    Vemma Agrees to Ban on Pyramid Scheme Practices to Settle FTC Charges

    Thursday, December 15th, 2016

    Health drinks marketer touted unlimited income potential, but most people lost money

    Under a settlement with the Federal Trade Commission, Arizona-based Vemma Nutrition Company will end the business practices that the FTC alleged created a pyramid scheme.

    The multi-level marketing (MLM) company, which sells health and wellness drinks through a network of distributors called “affiliates,” will be prohibited under a federal court order from paying an affiliate unless a majority of that affiliate’s revenue comes from sales to real customers rather than other distributors. The order also bars Vemma from making deceptive income claims and unsubstantiated health claims.

    “Unfortunately, extravagant income claims and compensation plans that reward recruiting over sales continue to plague the MLM industry,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “MLM companies must ensure that their promotional materials aren’t misleading, and that their compensation programs focus on selling goods or services to customers who really want them, not on recruiting more distributors.”

    In August 2015, the FTC brought a federal court action against Vemma Nutrition Company, Vemma International Holdings, Inc., CEO Benson K. Boreyko and top affiliate Tom Alkazin The companies’ “Young People Revolution” campaign targeted college students and other young adults with materials that presented Vemma as a profitable alternative to traditional employment and depicted young affiliates surrounded by conspicuous displays of wealth, such as luxury automobiles and yachts. Vemma allegedly failed to disclose that the program’s structure ensured that most participants would not earn substantial income, and provided affiliates with false and misleading materials for recruiting others.

    According to the complaint, the defendants encouraged participants to buy products to qualify for bonuses and to recruit others to do the same. The result, the agency alleged, was a pyramid scheme that compensated participants mainly for recruiting others rather than for retail sales based on legitimate consumer demand for the products.

    Vemma expanded throughout the U.S and several foreign countries and took in more than $200 million a year in revenue in 2013 and 2014.

    Under the stipulated order announced today, the Vemma companies and Boreyko are banned from any business venture that:

    • pays any compensation for recruiting new participants;
    • ties a participant’s compensation or an ability to be compensated to that participant’s purchases; or
    • pays a participant compensation related to sales in a pay period unless the majority of the revenue generated during that period, by the participant and others the participant has recruited, comes from sales to non-participants.

    The order also bars these defendants from involvement in any pyramid, Ponzi, or chain marketing schemes and prohibits them from making misrepresentations about the profitability of business ventures or the health benefits of products. The order imposes a $238 million judgment that will be partially suspended upon payment of $470,136 and the surrender of certain real estate and business assets. It also requires Vemma to provide compliance reports from an independent auditor for 20 years.

    A separate order provides similar conduct provisions against Vemma affiliate Tom Alkazin and his wife, Bethany Alkazin and imposes a judgment of more than $6.7 million, which will be partially suspended upon payment of more than $1.2 million and the surrender of certain real estate and business assets.

    The Commission vote approving the stipulated final orders was 3-0. The orders were filed in the U.S. District Court for the District of Arizona on December 15, 2016.

    To learn more about multilevel marketing, read Multilevel Marketing and Business Opportunity Scams. For other recent enforcement actions by the FTC regarding multilevel marketing, see Herbalife and FHTM.

    CONSUMER FINANCIAL PROTECTION BUREAU FINDS MARKETING DEALS WITH COLLEGES CAN MEAN COSTLY FEES AND RISKS FOR STUDENTS

    Wednesday, December 14th, 2016

    FOR IMMEDIATE RELEASE:
    December 14, 2016

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

    CONSUMER FINANCIAL PROTECTION BUREAU FINDS MARKETING DEALS WITH COLLEGES CAN MEAN COSTLY FEES AND RISKS FOR STUDENTS
    Bureau Urges Schools and Banks to Put Students Best Financial Interest First

     

    Washington, D.C. – Today the Consumer Financial Protection Bureau (CFPB) released a report raising new concerns about costly fees and risky features that can be attached to certain college-sponsored accounts. The Bureau’s analysis of roughly 500 marketing deals between these schools and large banks found that many deals allow for risky features that can lead students to rack up hundreds of dollars in fees per year. The report also examines trends in the school-sponsored credit card market.  The CFPB also issued a bulletin today reminding colleges and universities they are required to publicly disclose marketing agreements with credit card companies.

    “Deals between big banks and schools can drive students into accounts that contain high fees,” said Director Richard Cordray. “Today’s report shows that many schools are more focused on their bottom line than their students’ well-being when they agree to sponsor financial accounts. Many young people struggle to manage money while at school and we urge schools to put students’ financial interest first.”

    “Colleges across the country continue to make deals with banks to promote products that have high fees, despite the availability of safer and more affordable products,” said CFPB Student Loan Ombudsman Seth Frotman. “Students shouldn’t get stuck with the bill when their school inks a deal for an account that’s not in their best interest. ”

    The campus banking report is available at: http://files.consumerfinance.gov/f/documents/201612_cfpb_StudentBankingReport2016.pdf

    Around 10 million students attend a college or university that has made a deal with a financial institution where the college directly markets or allows the promotion of checking or prepaid accounts. These products are often endorsed with a college logo or linked to a student identification card. Many students also attend colleges with agreements to co-sponsor credit card accounts. These schools may get a share of the revenue generated from the products, and these agreements can offer financial institutions access to a new group of consumers.

    Research has shown that financial products sponsored by colleges or universities can contain high or unusual fees, which can be a worse deal for students than what they can find shopping around on their own. Since Congress passed new consumer protections for credit cards in 2009, marketing partnerships between colleges and universities and financial institutions have largely shifted from credit cards toward sponsored debit and prepaid accounts. In October 2015, the Department of Education established new student protections for the vast majority of college-sponsored financial accounts. These requirements include increased transparency and protections to help ensure accounts are negotiated in students’ best financial interests. As part of this effort, in September the Department of Education published a database of roughly 500 marketing agreements between schools and financial institutions so the public could review the various terms of agreements.

    The Bureau’s analysis of these marketing agreements found that, despite new student protections and the availability of safer and more affordable accounts, some of the nation’s largest colleges and universities continue to maintain deals with large banks that allow for the marketing of products that may not be in the best financial interests of their students and that contain costly features.  Key findings from the Bureau’s report and analysis of college marketing deals for prepaid and debit accounts include:

    • Dozens of bank deals with colleges fail to limit costly fees:  The Bureau found that dozens of deals with banks for school-sponsored accounts, including deals at some of the nation’s largest colleges and universities, do not place limits on account fees, such as overdraft fees, out-of-network ATM fees, or other common charges. These costly fees remain a concern at dozens of campuses, even as safer and more affordable alternatives are widely available at many other schools across the county.
    • Some students may pay hundreds of dollars per year in overdraft fees: College students may pay hundreds per year in overdraft fees when using student banking products. This is particularly concerning given that a growing body of evidence suggests that small financial shocks—such as a few hundred dollars— can cause significant financial hardship for students and even deter college completion. Further, the Bureau’s analysis found that fees associated with school-sponsored accounts can collectively cost a college student body hundreds of thousands of dollars per year.
    • Deals provide financial benefits for banks and schools but offer few, if any, financial benefits for students: The Bureau found marketing agreements between colleges and banks often contain extensive details about how the school and the bank can profit. Contracts frequently include details on revenue sharing and other payments made in exchange for exclusive marketing access to colleges’ student population. At the same time, many of these agreements do not require banks to offer safe and affordable accounts—and may drive students to high-cost products.
    • Some schools fail to disclose key details of marketing deals with banks: Most colleges were required by the Department of Education to publicly disclose marketing contracts by Sept. 1, 2016. However, the CFPB found that some agreements publicly announced by banks or colleges were not included in the Department of Education’s public database of agreements, suggesting that some schools did not submit their agreements to the Department before the agency’s disclosure website launched.

    Last year the Bureau also published a Safe Student Account Toolkit to help colleges evaluate whether to co-sponsor a prepaid or checking account with a financial institution. Colleges can choose to use the Safe Student Account Toolkit to evaluate costs and benefits for students, including accessing upfront information about fees, features, and sales tactics before agreeing to a sponsorship.

    The Safe Student Account Toolkit is available at: http://files.consumerfinance.gov/f/201512_cfpb_safe-student-account-toolkit.pdf 

    College Credit Card Agreements
    Today’s report also includes the Bureau’s annual analysis of college credit card agreements, which shows this market continues to decline. In 2009, Congress passed the Credit Card Accountability, Responsibility, and Disclosure (CARD) Act. This law requires issuers to disclose to the CFPB the terms and conditions of any college, university  or alumni credit card agreement, the number of new credit card accounts, and the compensation paid by issuers to institutions of higher education in the previous year. To help the public better understand the marketing partnerships between these schools and lenders, colleges and universities are required to disclose these agreements publicly.

    This report notes that the market continues to shift from credit card agreements to college-sponsored checking and prepaid accounts. In 2015, financial institutions paid colleges and universities nearly $27 million dollars based on 806,430 credit cards open under marketing agreements. This has declined from some 1,045 agreements in effect in 2009 totaling $84 million.

    Today’s report also notes that the Bureau remains concerned around the lack of transparency in these contracts. Despite the decline in the market, the Bureau continues to highlight the importance for students and the public to be able to easily review credit card marketing agreements. Through this transparency, they can see how much their school is being compensated by card issuers to use a specific account or card product. Last year, the Bureau conducted a review of 25 colleges and universities with active credit card agreements finding that most did not make copies of these agreements on their websites and most failed to provide alternatives ways to access the agreements.

    In response to these concerns, today the Bureau issued a bulletin reminding colleges and universities that they are required to publicly disclose marketing agreements with credit card companies. The bulletin outlines options for disclosing this information and warns that any such marketing agreements with credit card issuers must be disclosed publicly without delay.

    A copy of the bulletin can be found here: http://files.consumerfinance.gov/f/documents/201612_cfpb_StudentCardActBulletin.pdf

    The CFPB’s public database on college credit card agreements is available at: http://www.consumerfinance.gov/credit-cards/college-agreements/

    As part of the Paying for College suite of consumer tools, the CFPB developed a guide for students and their families on how to choose a student checking or debit card product. Managing Your College Money is available at: http://www.consumerfinance.gov/paying-for-college/manage-your-college-money/

    More information is available at: consumerfinance.gov/students

     

    CFPB Takes Action Against Reverse Mortgage Companies for Deceptive Advertising

    Wednesday, December 14th, 2016

    CFPB Takes Action Against Reverse Mortgage Companies for Deceptive Advertising

    Three Companies Cited For Falsely Claiming Consumers Could Not Lose Their Homes

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) took action against three reverse mortgage companies for deceptive advertisements, including claiming that consumers could not lose their homes. The CFPB is ordering American Advisors Group, Reverse Mortgage Solutions, and Aegean Financial to cease deceptive advertising practices, implement systems to ensure they are complying with all laws, and pay penalties.

    “These companies tricked consumers into believing they could not lose their homes with a reverse mortgage,” said CFPB Director Richard Cordray. “All mortgage brokers and lenders need to abide by federal advertising disclosure requirements in promoting their products.”

    A reverse mortgage is a special type of home loan that allows homeowners who are 62 or older to access the equity they have built up in their homes and defer payment of the loan until they pass away, sell, or move out. The loan proceeds are generally provided to the borrowers as lump-sum payments, monthly payments, or as lines of credit. Homeowners remain responsible for payment of taxes, insurance and home maintenance, among other obligations.

    The Mortgage Acts and Practices Advertising Rule prohibits misleading claims in mortgage advertising. In addition, the Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits institutions from engaging in deceptive acts or practices, including with regard to advertising of consumer financial products or services.

    American Advisors Group

    American Advisors Group, headquartered in Orange, Calif., is licensed in 49 states and the District of Columbia. It is the largest reverse mortgage lender in the United States. The company ran television advertisements almost daily and disseminated its information kit to approximately 1 million consumers. The information kit included a DVD and several brochures with information about reverse mortgage products.

    Through its investigation, the CFPB found that since January 2012 American Advisors Group’s advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The company also falsely told potential customers that they would have no monthly payments and that with a reverse mortgage they would be able to pay off all debts. In fact, consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance. Moreover, a reverse mortgage is a debt and therefore cannot be used to eliminate all of a consumer’s debt.

    Under the terms of today’s consent order, the company must make clear and prominent disclosures in its reverse mortgage advertisements and implement a system to ensure it is following all laws. It will also pay a civil penalty of $400,000.

    A copy of the American Advisors Group consent order can be found at:http://files.consumerfinance.gov/f/documents/201612_cfpb_AmericanAdvisorsGroup-consentorder.pdf

    Reverse Mortgage Solutions

    Reverse Mortgage Solutions, headquartered in Houston, Texas, is licensed to conduct business in 48 states. The company marketed its product through various media, including television, radio, print, direct mail, and the Internet.

    Through its investigation, the CFPB found that since January 2012 Reverse Mortgage Solutions’ advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The company also falsely told potential customers that they would have no payments with a reverse mortgage and that they would “always retain ownership” and “can’t be forced to leave.” In fact, consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance.

    The CFPB also alleges that the company misrepresented that heirs would inherit the home, without disclosing any conditions of the inheritance. In fact, heirs frequently are not able to keep the home after the death of a consumer with a reverse mortgage. Heirs are only allowed to retain ownership of the home after the consumer’s death if they either repay the reverse mortgage or pay 95 percent of the assessed value of the home.

    The company also created a false sense of urgency to buy the reverse mortgage product and misrepresented that time limits constrained the availability of a reverse mortgage. For example, one call script required representatives to tell potential customers that if they didn’t call back by close of business, they would “turn your file down and you will miss out on a tremendous money-saving opportunity.” In fact, it was not a limited time offer. Lastly, the company misrepresented that a reverse mortgage could “eliminate debt.” In fact, a reverse mortgage is a debt and therefore cannot be used to eliminate all of a consumer’s debt.

    Under the terms of today’s consent order, the company must make clear and prominent disclosures in its reverse mortgage advertisements and implement a system to ensure it is following all laws. It will also pay a civil penalty of $325,000.

    A copy of the Reverse Mortgage Solutions consent order can be found at:http://files.consumerfinance.gov/f/documents/201612_cfpb_ReverseMortgageSolutions-consentorder.pdf

    Aegean Financial

    Aegean Financial, headquartered in El Segundo, Calif., is licensed to conduct business in California, Louisiana, Oregon, Texas, and Washington. The company also operates under multiple names in the jurisdictions in which it is licensed. Under the name Jubilados Financial, the company advertises reverse mortgages to Spanish-speaking consumers in California. Under the name Reverse Mortgage Professionals, the company advertises reverse mortgages in California, Oregon, Washington, and Texas. Aegean Financial markets its product across various media, including print, direct mail, radio, and the Internet.

    Through its investigation, the CFPB found that since 2012, Aegean Financial’s advertisements misrepresented that consumers could not lose their home and that they would have the right to stay in their home for the rest of their lives. The reverse mortgage broker also falsely told potential customers that they would have no payments with a reverse mortgage and claimed that consumers would not be subject to costs associated with refinancing a reverse mortgage. In fact, consumers who refinance reverse mortgages do incur costs, including credit report fees, flood certification fees, title insurance costs, appraisal costs, and other closing costs. And consumers with a reverse mortgage still have payments and can default and lose their home if they fail to comply with the loan terms. These terms require, among other things, paying property taxes, making homeowner’s insurance payments, and paying for property maintenance.

    The CFPB also alleges that the company falsely affiliated itself with the government in its Spanish-language advertisements. For example, one advertisement said, “if you are 62 years old or older and you own a house, we have good news for you; you qualify for a reverse mortgage from the United States Housing Department.” In fact, although the Department of Housing and Urban Development provides insurance for the most popular type of reverse mortgage, a reverse mortgage is not a government benefit or a loan from the government. Nor is the product endorsed or sponsored by the government. The disclosures associated with Aegean Financial’s advertisements were in small type or rapidly recited at the end of commercials. The CFPB also alleges that the company failed to keep records of its advertisements as required by law.

    Under the terms of today’s consent order, the company cannot imply affiliation with the government, must make clear and prominent disclosures in its reverse mortgage advertisements, implement a system to ensure it is following all laws, and maintain complete and accurate records. It will also pay a civil penalty of $65,000.

    A copy of the Aegean Financial consent order can be found at:http://files.consumerfinance.gov/f/documents/201612_cfpb_AegeanFinancial-consentorder.pdf

    The CFPB has long warned of the dangers associated with misleading and deceptive reverse mortgage advertising given the complexity of the product and the consumers to whom the product is offered. For example, in a June 2012 Report to Congress on Reverse Mortgages, the CFPB stated that “[f]alse and misleading advertising poses a serious risk to consumers.” The CFPB also published a June 2015 study, and accompanying advisory warning, reaffirming the risk to consumers as a result of deceptive and misleading reverse mortgage advertising.

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    FTC Approves Final Order Settling Charges that Mars Petcare Made False Health Claims for Its Eukanuba Brand Dog Food

    Tuesday, December 13th, 2016

    Following a public comment period, the Federal Trade Commission has approved a final consent order with Mars Petcare U.S. settling charges that the company falsely advertised specific health benefits of its Eukanuba brand dog food.

    According to the FTC’s complaint, filed in August 2016, the company claimed in ads, but could not prove, that a 10-year study found that dogs fed Eukanuba could extend their expected lifespan by 30 percent or more. The Commission charged that the longevity claims were false or unsubstantiated and that the claim that longevity was proven through scientific evidence was false, in violation of the FTC Act.

    Under the final order settling the charges, Mars Petcare is barred from engaging in similar deceptive acts or practices in the future. The order prohibits the company from making any misleading or unsubstantiated claims that its Eukanuba-brand pet food or any other pet food will enable any dogs to extend their lifespan by 30 percent or more or live exceptionally long lives. It also prohibits the company from making misleading or unsubstantiated claims regarding the health benefits of any pet food, and requires it to have competent and reliable scientific evidence to back up any such claims.

    Finally, the proposed order prohibits Mars Petcare, when advertising any pet food, from misrepresenting the existence, results, conclusions, or interpretations of any study, or falsely stating that the health benefits claimed are scientifically proven. It also contains compliance and monitoring requirements to ensure the company abides by its terms.

    The Commission vote approving the final order and responses to the public commenters was 3-0. (FTC File No. 152-3229; the staff contact is David M. Newman, FTC Western Region, San Francisco, 415-848-5123.)

    National Collegiate private student loans

    Tuesday, December 13th, 2016

    Are you being sued or dunned on a private student loan allegedly held by National Collegiate Student Loan Trust? (updated)

    Until 2015, about 125 lawsuits per month were  filed to collect National Collegiate Student Loan Trust   loans in Cook County alone, with more in other Illinois counties.  We defended about 100  of these cases.  Most of those we have defended have been dismissed, with or without prejudice.  As a result, the filing of new cases virtually ceased.

    Recently, National Collegiate trusts have resumed filing lawsuits against Illinois residents.

    Some important dos and don’ts with respect to these loans:

    DO NOT  allow National Collegiate to get a judgment against you by failing to respond to a summons and complaint.  National Collegiate  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, National Collegiate  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.

    DO NOT agree to a judgment with an agreement that you will pay a small sum per month for six months or so.  At one point, National Collegiate was trying 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.

    DO NOT  make the mistake of calling National Collegiate 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 you have a defense, whether we will take your case and what our fees will be.

    DO NOT ASSUME THAT NATIONAL COLLEGIATE IS ENTITLED TO COLLECT without having an attorney familiar with these loans examine potential defenses.  We believe that most National Collegiate cases have serious problems with them, for multiple reasons.

    • First, we believe that virtually all of the lawsuits filed on these loans are filed in violation of Illinois law.
    • Second, National Collegiate sometimes cannot prove that it has the right to collect on the student loan debt at issue. In at least one case, National Collegiate filed suit on a loan that had been assigned to another entity and paid in full to that entity.
    • Sometimes National Collegiate cannot prove  the amount due.  National Collegiate loans are actually serviced by Transworld/ NCO Financial, an organization which has a long history of consent orders and government investigations.   Transworld is currently under investigation by the Consumer Financial Protection Bureau; this casts doubt on the accuracy of any records it produces.
    • Some suits appear to be filed beyond the statute of limitations.  We have obtained rulings that these loans are governed by the five-year Illinois statute of limitations, not the ten year statute as National Collegiate claims.
    • The interest rates on some of the loans may be unlawful.
    • Finally, we believe that many or all of the obligations of cosigners under these loans may not be enforceable.

    We have lots of experience defending claims on these private loans.  We have also brought a number of affirmative claims challenging National Collegiate’s  collection practices, as both individual and (more than half a dozen) class actions.  Many of these collection practices, including many National Collegiate collection letters, violate the Fair Debt Collection Practices Act and other laws.

    If you are currently being sued or dunned on a private student loan allegedly held by National Collegiate, please call us immediately.

    Also, please send us any collection letters seeking to collect National Collegiate loans.  Many contain violations of the Fair Debt Collection Practices Act and other laws.

    Perkins loans

    Tuesday, December 13th, 2016

    Please contact us if a debt collector is trying to collect a Perkins loan from you.  It appears that in some or many cases, the collectors are trying to obtain collection fees in excess of 30% of the principal, interest and late charges.  Collection fees are capped by law at 30%.