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    CFPB Sues Four Online Lenders for Collecting on Debts Consumers Did Not Legally Owe

    Thursday, April 27th, 2017

    CFPB Sues Four Online Lenders for Collecting on Debts Consumers Did Not Legally Owe

    Bureau Alleges Companies Deceived Consumers About Debt That Was Not Legally Owed

    WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against four online lenders – Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. – for deceiving consumers by collecting debt they were not legally owed. In a suit filed in federal court, the CFPB alleges that the four lenders could not legally collect on these debts because the loans were void under state laws governing interest rate caps or the licensing of lenders. The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. The CFPB seeks to stop the unlawful practices, recoup relief for harmed consumers, and impose a penalty.

    “We are suing four online lenders for collecting on debts that consumers did not legally owe,” said CFPB Director Richard Cordray. “We allege that these companies made deceptive demands and illegally took money from people’s bank accounts. We are seeking to stop these violations and get relief for consumers.”

    Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. are online installment loan companies in Upper Lake, California. Since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans of between $300 and $1,200 with annual interest rates ranging from 440 percent up to 950 percent. Mountain Summit Financial and Majestic Lake Financial began offering similar loans more recently.

    The Bureau’s investigation showed that the high-cost loans violated licensing requirements or interest-rate caps – or both – that made the loans void in whole or in part in at least 17 states: Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, and South Dakota. The Bureau alleges that the four lenders are collecting money that consumers do not legally owe. The CFPB’s suit alleges that Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial, and Majestic Lake Financial violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The specific allegations include:

    •  Deceiving consumers about loan payments that were not owed: The lenders pursued consumers for payments even though the loans in question were void in whole or in part under state law and payments could not be collected. The interest rates the lenders charged were high enough to violate usury laws in some states where they did business, and violation of these usury laws renders particular loans void. In addition, the lenders did not obtain licenses to lend or collect in certain states, and the failure to obtain those licenses renders particular loans void. The four lenders created the false impression that they had a legal right to collect payments and that consumers had a legal obligation to pay off the loans.
    • Collecting loan payments which consumers did not owe: The four lenders made electronic withdrawals from consumers’ bank accounts or called or sent letters to consumers demanding payment for debts that consumers were under no legal obligation to pay.
    • Failing to disclose the real cost of credit: The lenders’ websites did not disclose the annual percentage rates that apply to the loans. When contacted by prospective borrowers, the lenders’ representatives also did not tell consumers the annual percentage rate that would apply to the loans.

    Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws like the Truth in Lending Act. The CFPB is seeking monetary relief for consumers, civil money penalties, and injunctive relief, including a prohibition on collecting on void loans, against Golden Valley and the other lenders. The Bureau’s complaint is not a finding or ruling that the defendant have actually violated the law.

    A copy of the complaint filed in federal district court is available at: http://files.consumerfinance.gov/f/documents/201704_cfpb_Golden-Valley_Silver-Cloud_Majestic-Lake_complaint.pdf

    Marketers of ‘NutriMost Ultimate Fat Loss System’ Settle FTC Charges

    Friday, April 21st, 2017

    The marketers of a weight-loss system advertised as using “breakthrough technology” and “personalized supplements” to help consumers permanently lose “20 to 40+ pounds in 40 days” without significantly cutting calories, have agreed to settle a Federal Trade Commission complaint that the claims were deceptive and not supported by scientific evidence.

    The court order settling the FTC’s charges bars the sellers of the “NutriMost Ultimate Fat Loss System” from making the deceptive claims alleged in the complaint, as well as providing others, including franchisees, with the means of deceiving consumers. The defendants also will pay $2 million to provide refunds to consumers defrauded by buying the system directly from the defendants, not from franchisees.

    According to the FTC’s complaint, since fall 2012, NutriMost, LLC; NutriMost Doctors, LLC; and their owner Raymond Wisniewski deceptively marketed the NutriMost weight-loss program to consumers. Sold at Wisniewski’s eight locations in the Pittsburgh area and by franchisees and licensees nationwide, the NutriMost System was marketed as using a new technology that would allow users to safely lose substantial amounts of weight – typically 20 to 40 pounds or more in 40 days.

    On their websites, on Facebook, and in traditional radio and newspaper ads, the defendants claimed the NutriMost System does not involve a restrictive diet, causes permanent weight loss, and helps users burn between 2,000 and 7,000 calories of fat per day. Claiming that the system would “Turn OFF fat storage and Turn ON fat burning,” the defendants charged consumers $1,895 for the program.

    The system was promoted, without appropriate support, as “having the technology to access nearly every factor of fat burning, fat storage and metabolism,” using a scan to address the “body’s top organ stressors, as well as find the best products to balance those . . . stressors.” What the defendants allegedly failed to say, however, was that to achieve the weight loss advertised, users would have to follow a restrictive diet, including a very low-calorie diet of about 500 calories a day. Only after they bought the system were consumers told of the extreme caloric restrictions, the FTC alleges.

    The complaint charges the defendants with using endorsements and testimonials for the system without disclosing that the endorsers had material connections to the defendants or their franchisees. The FTC also alleges that the defendants required buyers to sign a contract agreeing not to make any negative statements or comments about the NutriMost System, and that if consumers violated this requirement, they would have to pay the defendants $35,999. Finally, the defendants also allegedly provided program licensees and franchisees with the means to violate the FTC Act by giving them misleading and deceptive marketing materials, as well as the form contract containing the gag clause prohibiting negative reviews.

    The order settling the FTC’s complaint prohibits the defendants from making weight-loss and health claims unless they are not misleading and are supported with competent and reliable scientific evidence. It also bars the defendants from misrepresenting that users do not need to follow a restrictive diet.

    Next, it requires the defendants to disclose that their program includes a diet of less than 800 calories a day, if it does, and, if defendants make any representation regarding the safety of a program that includes a diet of less than 800 calories a day, then they must also disclose that physician monitoring is required to minimize the potential for health risks.

    The order prohibits the defendants from using deceptive endorsements in their marketing materials and from including non-disparagement clauses in their contracts. It also bars them from providing others with the means of making deceptive statements regarding weight-loss products or programs. Finally, it imposes a $32 million judgment against the defendants, which will be suspended based on defendants’ financial condition after they pay $2 million for consumer refunds.

    The Commission vote authorizing the staff to file the complaint and to approve the stipulated proposed order was 2-0. The FTC filed the complaint and proposed order in the U.S. District Court for the Western District of Pennsylvania. The FTC received assistance in investigating this case from Pittsburgh’s Better Business Bureau serving Western Pennsylvania.

    NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated court orders have the force of law when approved and signed by the District Court judge

    CONSUMER FINANCIAL PROTECTION BUREAU SUES OCWEN FOR FAILING BORROWERS THROUGHOUT MORTGAGE SERVICING PROCESS

    Thursday, April 20th, 2017

    CONSUMER FINANCIAL PROTECTION BUREAU SUES OCWEN FOR FAILING BORROWERS THROUGHOUT MORTGAGE SERVICING PROCESS
    Mortgage Servicer’s Widespread Errors, Shortcuts, and Runarounds Cost Borrowers Money, Homes

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today sued one of the country’s largest nonbank mortgage loan servicers, Ocwen Financial Corporation, and its subsidiaries for failing borrowers at every stage of the mortgage servicing process. The Bureau alleges that Ocwen’s years of widespread errors, shortcuts, and runarounds cost some borrowers money and others their homes. Ocwen allegedly botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance. Allegedly, Ocwen also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records. The Florida Attorney General took a similar action against Ocwen today in a separate lawsuit. Many state financial regulators are also independently issuing cease-and-desist and license revocation orders against Ocwen for escrow management and licensing issues today.

    “Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said CFPB Director Richard Cordray. “Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment.”

    Ocwen, headquartered in West Palm Beach, Fla., is one of the nation’s largest nonbank mortgage servicers. As of Dec. 31, 2016, Ocwen serviced almost 1.4 million loans with an aggregate unpaid principal balance of $209 billion. It services loans for borrowers in all 50 states and the District of Columbia. A mortgage servicer collects payments from the mortgage borrower and forwards those payments to the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures. Ocwen specializes in servicing subprime or delinquent loans.

    The CFPB uncovered substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process. The CFPB is charged with enforcing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which protects consumers from unfair, deceptive, or abusive acts or practices, and other federal consumer financial laws. In addition, the Bureau adopted common-sense rules for the mortgage servicing market that first took effect in January 2014. The CFPB’s mortgage servicing rules require that servicers promptly credit payments and correct errors on request. The rules also include strong protections for struggling homeowners, including those facing foreclosure. In its lawsuit, the CFPB alleges that Ocwen:

    • Serviced loans using error-riddled information: Ocwen uses a proprietary system called REALServicing to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information. Ocwen allegedly loaded inaccurate and incomplete information into its REALServicing system. And even when data was accurate, REALServicing generated errors because of system failures and deficient programming. To manage this risk, Ocwen tried manual workarounds, but they often failed to correct inaccuracies and produced still more errors. Ocwen then used this faulty information to service borrowers’ loans. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
    • Illegally foreclosed on homeowners: Ocwen has long touted its ability to service and modify loans for troubled borrowers. But allegedly, Ocwen has failed to deliver required foreclosure protections. As a result, the Bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people, and has wrongfully held foreclosure sales. Among other illegal practices, Ocwen has initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications. In other instances, Ocwen has asked borrowers to submit additional information within 30 days, but foreclosed on the borrowers before the deadline. Ocwen has also foreclosed on borrowers who were fulfilling their obligations under a loss mitigation agreement.
    • Failed to credit borrowers’ payments: Ocwen has allegedly failed to appropriately credit payments made by numerous borrowers. Ocwen has also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information. Ocwen has also failed to correct billing and payment errors.
    • Botched escrow accounts: Ocwen manages escrow accounts for over 75 percent of the loans it services. Ocwen has allegedly botched basic tasks in managing these borrower accounts. Because of system breakdowns and an over-reliance on manually entering information, Ocwen has allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly failed to properly account for and apply payments by borrowers to address escrow shortages, such as changes in the account when property taxes go up. One result of this failure has been that some borrowers have paid inaccurate amounts.
    • Mishandled hazard insurance: If a servicer administers an escrow account for a borrower, a servicer must make timely insurance and/or tax payments on behalf of the borrower. Ocwen, however, has allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed into force-placed insurance.
    • Bungled borrowers’ private mortgage insurance: Ocwen allegedly failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely way, causing consumers to overpay. Generally, borrowers must purchase PMI when they obtain a mortgage with a down payment of less than 20 percent, or when they refinance their mortgage with less than 20 percent equity in their property. Servicers must end a borrower’s requirement to pay PMI when the principal balance of the mortgage reaches 78 percent of the property’s original value. Since 2014, Ocwen has failed to end borrowers’ PMI on time after learning information in its REALServicing system was unreliable or missing altogether. Ocwen ultimately overcharged borrowers about $1.2 million for PMI premiums, and refunded this money only after the fact.
    • Deceptively signed up and charged borrowers for add-on products: When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some consumers in add-on products through deceptive solicitations and without their consent. Ocwen then billed and collected payments from these consumers.
    • Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly mishandled accounts for successors-in-interest, or heirs, to a deceased borrower. These consumers included widows, children, and other relatives. As a result, Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help avoid foreclosure. In some instances, Ocwen foreclosed on individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.
    • Failed to adequately investigate and respond to borrower complaints: If an error is made in the servicing of a mortgage loan, a servicer must generally either correct the error identified by the borrower, called a notice of error, or investigate the alleged error. Since 2014, Ocwen has allegedly routinely failed to properly acknowledge and investigate complaints, or make necessary corrections. Ocwen changed its policy in April 2015 to address the difficulty its call center had in recognizing and escalating complaints, but these changes fell short. Under its new policy, borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved. Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers.
    • Failed to provide complete and accurate loan information to new servicers: Ocwen has allegedly failed to include complete and accurate borrower information when it sold its rights to service thousands of loans to new mortgage servicers. This has hampered the new servicers’ efforts to comply with laws and investor guidelines.

    The Bureau also alleges that Ocwen has failed to remediate borrowers for the harm it has caused, including the problems it has created for struggling borrowers who were in default on their loans or who had filed for bankruptcy. For these groups of borrowers, Ocwen’s servicing errors have been particularly costly.

    Through its complaint, filed in federal district court for the Southern District of Florida, the CFPB seeks a court order requiring Ocwen to follow mortgage servicing law, provide relief for consumers, and pay penalties. The complaint is not a finding or ruling that the defendants have actually violated the law.

    The lawsuit is available at: http://files.consumerfinance.gov/f/documents/20170420_cfpb_Ocwen-Complaint.pdf

    CFPB Files Suit Against Law Firm for Misrepresenting Attorney Involvement in Collection of Millions of Debts

    Tuesday, April 18th, 2017

    CFPB Files Suit Against Law Firm for Misrepresenting Attorney Involvement in Collection of Millions of Debts

    CFPB Alleges Weltman, Weinberg & Reis Deceived Consumers with Misleading Calls and Letters

    WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit in a federal district court against the debt collection law firm Weltman, Weinberg & Reis for falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt. The law firm made statements on collection calls and sent collection letters creating the false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review has occurred. The CFPB is seeking to stop the unlawful practices and recoup compensation for consumers who have been harmed.

    “Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true,” said CFPB Director Richard Cordray. “Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market.”

    Weltman, Weinberg & Reis, based in Cleveland, Ohio, regularly collects debt related to credit cards, installment loan contracts, mortgage loans, and student loans. It collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, and Pennsylvania.

    The CFPB alleges that the firm engaged in illegal debt collection practices. In form demand letters and during collection calls to consumers, the firm implied that lawyers had reviewed the veracity of a consumer’s debt. But typically, no attorney had reviewed any aspect of a consumer’s individual debt or accounts. No attorney had assessed any consumer-specific information. And no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a call, or that the account was a candidate for litigation.

    The CFPB alleges that the company is violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since at least July 21, 2011, the law firm has sent millions of demand letters to consumers. Specifically, the CFPB alleges that the law firm:

    • Sent collection letters falsely implying they were from a lawyer: Weltman, Weinberg & Reis sent letters on formal law firm letterhead with the phrase “Attorneys at Law” at the top of the letter and stated the law firm’s name in the signature line. The letters also included a payment coupon indicating that payment should be sent to the firm. Some demand letters referred to possible “legal action” against consumers who did not make payments. Despite these representations, the vast majority of the time, no attorneys had reviewed consumer accounts or made any determination that the consumer owed the debt, that a specific letter should be sent to the consumer, or that the account was a candidate for litigation before these letters were sent.
    • Called consumers and falsely implied a lawyer was involved: Weltman, Weinberg & Reis’s debt collectors told consumers during collection calls that they were calling from a law firm. Specifically, sometimes they told consumers that it was the “largest collection law firm in the United States,” or that the debt had been placed with “the collections branch of our law firm.” This implied that attorneys participated in the decision to make collection calls, but no attorney had reviewed consumer accounts before debt collectors called consumers.

    The Bureau is seeking to stop the alleged unlawful practices of Weltman, Weinberg & Reis. The Bureau has also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.

    The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law.

    The full text of the complaint can be found at:http://files.consumerfinance.gov/f/documents/201704_cfpb_Weltman-Weinberg-Reis_Complaint.pdf

    Loancare

    Monday, April 17th, 2017

    Please contact us if you have received a collection notice from Loancare