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    Federal Trade Commission Herbalife order

    Friday, July 15th, 2016

    Company Must Tie Distributor Rewards to Verifiable Retail Product Sales And Stop Misleading Consumers about Potential Earnings

    Note: A press conference with FTC Chairwoman Edith Ramirez will be held today at 10 a.m. ET, 600 Pennsylvania Ave. NW, Room 432, Washington, DC.
    Reporters unable to attend the event can call in. Chairwoman Ramirez and FTC staff will be available to take questions from the media about the case.
    The phone number is (800) 288-8961; the confirmation ID number is 398337. The lines, which are only for news media, will open at 10:00 a.m. The conference leader is Bruce Jennings.

    The event will be webcast live at https://kvgo.com/ftc/07-15-2016-Press-Announcement.

    Herbalife International of America, Inc., Herbalife International, Inc., and Herbalife, Ltd. have agreed to fully restructure their U.S. business operations and pay $200 million to compensate consumers to settle Federal Trade Commission charges that the companies deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.

    In its complaint against Herbalife, the FTC also charged that the multi-level marketing company’s compensation structure was unfair because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product, causing substantial economic injury to many of its distributors.

    “This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” FTC Chairwoman Ramirez said. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices.”

    According to the FTC’s complaint, Herbalife claims that people who participate can expect to quit their jobs, earn thousands of dollars a month, make a career-level income, or even get rich. But the truth, as alleged in the FTC complaint, is that the overwhelming majority of distributors who pursue the business opportunity earn little or no money.

    For example, as stated in the complaint, the average amount that more than half the distributors known as “sales leaders” received as reward payments from Herbalife was under $300 for 2014. According to a survey Herbalife itself conducted, which is described in the complaint, Nutrition Club owners spent an average of about $8,500 to open a club, and 57 percent of club owners reported making no profit or losing money.

    The small minority of distributors who do make a lot of money, according to the complaint, are compensated for recruiting new distributors, regardless of whether those recruits can sell the products they are encouraged to buy from Herbalife.

    Finding themselves unable to make money, the FTC’s complaint alleges, Herbalife distributors abandon Herbalife in large numbers. The majority of them stop ordering products within their first year, and nearly half of the entire Herbalife distributor base quits in any given year.

    The settlement announced today requires Herbalife to revamp its compensation system so that it rewards retail sales to customers and eliminates the incentives in its current system that reward distributors primarily for recruiting. It mandates a new compensation structure in which success depends on whether participants sell Herbalife products, not on whether they buy products.

    For example:

    • The company will now differentiate between participants who join simply to buy products at a discount and those who join the business opportunity. “Discount buyers” will not be eligible to sell product or earn rewards.
    • Multi-level compensation that business opportunity participants earn will be driven by retail sales. At least two-thirds of rewards paid by Herbalife to distributors must be based on retail sales of Herbalife products that are tracked and verified. No more than one-third of rewards can be based on other distributors’ limited personal consumption.
    • Companywide, in order to pay compensation to distributors at current levels, at least 80 percent of Herbalife’s product sales must be comprised of sales to legitimate end-users. Otherwise, rewards to distributors must be reduced.
    • Herbalife is prohibited from allowing participants to incur the expenses associated with leasing or purchasing premises for “Nutrition Clubs” or other business locations before completing their first year as a distributor and completing a business training program.

    Under the order, Herbalife will pay for an Independent Compliance Auditor (ICA) who will monitor the company’s adherence to the order provisions requiring restructuring of the compensation plan. The ICA will be in place for seven years and will report to the Commission, which shall have authority to replace the ICA if necessary.

    The settlement also prohibits Herbalife from misrepresenting distributor’s earnings potential or likely earnings. The order specifically prohibits Herbalife from claiming that members can “quit their job” or otherwise enjoy a lavish lifestyle.

    In addition, the order imposes a $200 million judgment against Herbalife to provide consumer redress, including money for consumers who purchased large quantities of Herbalife products (such as many Nutrition Club owners, among others) and lost money. Information on the FTC’s redress program will be announced at a later date.

    The Commission votes authorizing the staff to file the complaint and stipulated final order, and to issue a Statement of the Commission, were 3-0. The complaint and the stipulated final order will be filed shortly in the U.S. District Court for the Northern District of California, San Francisco Division.

    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 final injunctions/orders have the force of law when approved and signed by the District Court judge.

    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, follow us on Twitter, read our blogs andsubscribe to press releases for the latest FTC news and resources.

    criminal action vs debt collector

    Thursday, July 14th, 2016

    FTC and State Law Enforcement Partners Announce More Actions and Results in Continuing Crackdown Against Abusive Debt Collectors

    FOR RELEASE

    In four separate actions, the Federal Trade Commission is announcing that it has stopped illegal debt collection tactics of several debt collection operations. In addition, other federal and state law enforcement officials have taken 12 more actions as part of a federal-state-local law enforcement initiative against deceptive and abusive debt collection practices. The cases announced today bring to 130 the number of actions taken over the past year by more than 70 law enforcement partners in Operation Collection Protection.

    The continuing nationwide crackdown targets collectors whose illegal tactics include harassing phone calls, false threats of lawsuits and arrest, attempts to collect phony debts, not providing consumers with legally required disclosures, and noncompliance with state licensing requirements.

    The FTC actions announced today include:

    AFS Legal Services

    In November 2015, the FTC brought an action against National Payment Processing LLC; National Client Services LLC, also doing business as AFS Legal Services, AFS Services, Account Financial Services, and Account Financial Solutions; Omar Smith; and Ernest Smith. The operation allegedly called consumers and demanded payment of payday loan or other purported debt, even when consumers disputed the debt and the defendants failed to verify that money was owed.

    According to the FTC’s complaint, the defendants impersonated investigators and law enforcement and threatened to arrest or sue consumers if they did not pay. Because they often had consumers’ personal information such as Social Security and bank account numbers, consumers believed the calls were legitimate and thought they would be arrested for check fraud or sued. The collectors also made harassing calls and contacted relatives, friends and co-workers about consumers’ debts. The defendants allegedly have caused around $4 million in consumer injury, using multiple corporate names and locations to avoid detection, and failing to identify themselves as debt collectors.

    The defendants have agreed to be bound by a preliminary injunction, pending the litigation in which they are prohibited from using the illegal collection tactics described in the FTC’s complaint. They are also barred from activities that violate the FDCPA.

    The FTC appreciates the assistance of the Rockdale County Sheriff’s Office, DeKalb County Police Department, Gwinnett County Police Department, and Hapeville Police Department in bringing this case.

    The Commission vote authorizing the staff to file the complaint for permanent injunction was 4-0. The U.S. District Court for the Northern District of Georgia, Atlanta Division, issued a temporary restraining order against the defendants on November 3, 2015, and a stipulated preliminary injunction on January 5, 2016.

    Samuel Sole and Associates

    In May 2015, the FTC obtained court orders temporary halting the operations of Premier Debt Acquisitions LLC, also doing business as PDA Group LLC; Prizm Debt Solutions LLC, also d/b/a PDS LLC; Samuel Sole and Associates LLC, also d/b/a SSA Group LLC and Imperial Processing Solutions; Charles Glander; and Jacob E. Kirbis. The FTC alleged that the defendants had impersonated law enforcement officials or process servers, threatened to have consumers arrested for nonpayment, falsely threatened consumers with lawsuits and wage garnishment, and withheld information consumers needed to confirm or dispute debts.

    The defendants have now agreed to a stipulated order for permanent injunction, that will ban them from debt collection activities, and prohibit them from misrepresenting material facts about financial-related products and services and from profiting from their former customers’ personal information. The order imposes a judgment of $2,229,756, representing the amount of the defendants’ debt collection revenue, which will be partially suspended upon surrender of certain personal assets, including real estate.

    The Commission vote authorizing the staff to file a proposed stipulated order for permanent injunction in the U.S. District Court for the Western District of New York was 4-0. Stipulated orders have the force of law when approved and signed by the District Court judge.

    Warrant Enforcement Division

    Defendants Municipal Recovery Services Corporation, d/b/a Warrant Enforcement Division, and its owner, Marcos Nieto, a/k/a Mark Nieto have agreed to settle FTC charges that they violated the FTC Act when they sent consumers letters and postcards that falsely implied that they had come from a municipal court and falsely threatened consumers with arrest if they did not pay while collecting overdue municipal utility bills, traffic tickets, court fines and other debts for local governments in Texas and Oklahoma. One letter, labeled “WARRANT FOR YOUR ARREST,” falsely threatened arrest at the consumer’s home or office, jail time, vehicle impoundment, and inability to renew a driver’s license. A “FINAL NOTICE BEFORE ARREST” letter followed, falsely stating that “WARRANT OFFICERS HAVE BEEN GIVEN YOUR CURRENT ADDRESS.” The defendants also mailed postcards to collect on past-due utility bills, stating “PAY YOUR FINE NOW—AVOID GOING TO JAIL.” According to the complaint, the defendants also failed to inform consumers of the amount of the debt and the creditor’s name, and their right to dispute the debt, as required by the Fair Debt Collection Practices Act.

    Under a proposed stipulated order for permanent injunction, the defendants are prohibited from misrepresenting any material fact while collecting debts, including that a failure to pay a debt will result in the consumer being arrested or jailed, having their vehicle impounded, or being unable to renew their driver’s license. The order imposes a $194,888 judgment that is suspended based on the defendants’ inability to pay. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

    The Commission vote authorizing the staff to file the complaint and proposed stipulated order for permanent injunction in the U.S. District Court for the Northern District of Texas, Dallas Division, was 4-0. Stipulated orders have the force of law when approved and signed by the District Court judge.

    Williams, Scott & Associates

    The FTC has obtained a permanent injunction against the final defendant in its case against Williams, Scott & Associates, LLC. On November 4, 2015, the court granted summary judgment in the FTC’s favor and banned Chris Lenyszyn from debt collection activities, and ordered him to pay more than $565,000 for using deception and threats to collect on phantom payday and other loan “debts” that consumers didn’t owe. An earlier order, in April 2015, banned John Williams, Williams, Scott & Associates, LLC; and WSA, LLC from debt collection and ordered them to pay $3.9 million.

    The FTC thanks the Federal Bureau of Investigations, the Consumer Protection Unit of the Georgia Attorney General’s Office, the State Bar of Georgia, and the Financial Institutions Division of the Nevada Department of Business and Industry for their assistance in this case.

    In addition, since Operation Collection Protection was announced in November 2015:

    • the Consumer Financial Protection Bureau has resolved four law enforcement actions and issued acompliance bulletin on in-person debt collection;
    • the Minnesota Department of Commerce signed consent orders that stopped Collect Pros and Service Investment Company from further law violations and imposed civil penalties totaling $33,000, and convinced a court to impose a receivership on CLX/Westwood Management, Inc. (details can be found here(link is external));
    • the Colorado Department of Law denied Collect Pros’ renewal application and 4-Star Resolution’s license application and took action against PC Legal Services for engaging in collection practices without a license, resulting in a $613,500 civil penalty (details can be found here);
    • the Indiana Attorney General’s Office also took action against Collect Pros, entering into an assurance of voluntary compliance(link is external) with Collect Pros; and
    • the Massachusetts Attorney General’s office sued one of the largest debt collection law firms in Massachusetts, Lustig, Glaser & Wilson PC and its owners, Ronald Lustig and Kenneth Wilson, who allegedly used illegal threats of lawsuits to obtain payments and sued consumers for debts they did not owe or for debts that were inaccurate.

     

    CFPB action against Santander

    Thursday, July 14th, 2016

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS SANTANDER BANK TO PAY $10 MILLION FINE FOR ILLEGAL OVERDRAFT PRACTICES
    Bank Deceptively Marketed Its Overdraft Service to Consumers, Violated “Opt-in” Rule

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has ordered Santander Bank, N.A. to pay a $10 million fine for illegal overdraft service practices. Santander’s telemarketing vendor deceptively marketed the overdraft service and signed certain bank customers up for the service without their consent. In addition to paying the civil money penalty to the CFPB, Santander Bank must go back and give consumers the opportunity to provide their affirmative consent to overdraft service, not use a vendor to telemarket its overdraft service, and it must increase oversight of vendors it uses to telemarket consumer financial products or services.

    “Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees,” said CFPB Director Richard Cordray. “Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers.”

    Santander is a national bank based in Wilmington, Del. Santander Bank operates a network of nearly 700 retail branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island. Santander offers overdraft service with its checking accounts. An overdraft can occur when consumers spend or withdraw more money from their checking accounts than is available.

    From 2010 to 2014, Santander marketed and enrolled consumers in its “Account Protector” overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. Santander used a telemarketer to call consumers to persuade them to opt in to the overdraft service and rewarded the telemarketer with a higher hourly rate when it hit specified sales targets.

    In 2010, federal rules took effect prohibiting banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opt in. If consumers don’t opt in, banks may decline the transactions because of insufficient or unavailable funds, and can’t charge an overdraft fee.

    The Bureau found that Santander marketed its overdraft service deceptively during telemarketing calls and enrolled consumers in overdraft service without their consent in violation of the opt-in rule. For example, during numerous telemarketing calls, call representatives did not ask the consumers if they wanted to opt in but enrolled them anyway. The Bureau found Santander Bank’s illegal and improper practices included:

    • Signing consumers up for overdraft service without their consent: In some instances, Santander’s telemarketer briefly described Account Protector to consumers, then asked for the last four digits of their Social Security numbers, and enrolled them without their consent. In other instances, consumers said they did not want to enroll but requested information about the overdraft service, but the telemarketer enrolled them anyway. When Santander charged those consumers overdraft fees on ATM and one-time debit card transactions, it violated the opt-in rule.
    • Deceiving consumers that overdraft service was free: Call representatives led consumers to believe that Account Protector was free, when in fact it could potentially cost them hundreds of dollars in fees. Some call representatives falsely suggested that consumers would not be charged a fee if they brought their account current within five business days of an overdraft. Other representatives implied that consumers would be charged fees only for emergency transactions, and that non-emergency purchases would not result in fees.
    • Deceiving  consumers about the fees they would face if they did not opt in: In some instances, call representatives told consumers the bank would charge overdraft fees on ATM and one-time debit card transactions regardless of whether they signed up for Account Protector. In fact, Santander could not charge those fees without the consumer’s consent. Some representatives even told consumers that they risked being charged additional fees if they did not sign up for Account Protector, when in fact the opposite was true.
    • Falsely claiming the call was not a sales pitch: Call representatives falsely told consumers that “this is not a sales call” and that the reason for the call was that the bank had recently changed its name. In fact, the purpose of the call was to sell Account Protector, and Santander’s name change was irrelevant.
    • Failing to stop its telemarketer’s deceptive tactics: Santander offered the telemarketer financial incentives to hit certain sales targets. Santander then failed to identify and stop the deceptive and other improper tactics that its telemarketer used to achieve those sales targets.

    Enforcement Action
    Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices, or other violations of federal consumer financial law. Santander Bank violated the Electronic Fund Transfer Act and the Dodd-Frank Act. The CFPB’s order requires that Santander Bank:

    • Validate all opt-ins associated with the telemarketer: Santander will contact all consumers who were enrolled in Account Protector through the bank’s telemarketer, and ask them whether they wish to be opted in. Santander will not be able to charge those consumers overdraft fees unless they affirmatively consent to opting in.
    • Not use a vendor to telemarket overdraft service: Santander is prohibited from using a vendor to conduct outbound telemarketing of overdraft service to consumers. Santander also may not require its employees to generate a target number of opt-ins or provide its employees with financial incentives in connection with opt-ins.
    • Increase oversight of all third-party telemarketers: Santander will develop and implement a new or revised policy governing vendor management for service providers engaged in telemarketing of consumer financial products or services.
    • Pay a $10 million penalty: Santander will make a $10 million penalty payment to the CFPB’s Civil Penalty Fund.

    You do not have to pay to receive benefits from a class action

    Thursday, July 7th, 2016

    Scam emails purport to be from federal courts in Rockford and Chicago

    It doesn’t matter if the email appears to bear the federal court system’s official seal, Bruton said, because “it’s not the true seal. It’s someone fictitiously making it up.” But recipients may not realize it’s phony, he said.

    Bruton said he recently learned of these scam emails after “someone contacted us to ask us if this was valid. This could be more widespread than we’re aware of.”

    Bruton said he doesn’t know when this scam originated or how many people may have received such emails. The emails might appear to contain a court order, a guarantee of claims release, bill of costs or state that the person is entitled to a class action settlement.

     

    Anyone who thinks he or she may have received a suspicious email, even if it is from a bank or the federal court system, should “certainly telephone the institution or visit them in person” to inquire if the email is legitimate or might be a scam, Croon said.

    Anyone who wishes to verify the authenticity of such an email is asked to call their local FBI office or Bruton’s office, Bruton said. To verify documents, residents also may email those messages to verify_documents_ilnd@ilnd.uscourts.gov or log onto Public Access to Court Electronic Records, also known as PACER. That web address is pacer.login.uscourts.gov.

     

    imposter scams

    Monday, June 27th, 2016

    If you have a computer or a phone, you’ve probably been targeted by a scammer pretending to be someone they’re not: maybe the IRS, another government official, a family member or friend, or a tech company. These imposters come in many varieties, but work the same way: the person pretending to be someone you trust tries to convince you to send money. The FTC received 353,770 imposter-related complaints last year.

    Today, the Federal Trade Commission released new resources at ftc.gov/imposters to help you spot and avoid four common kinds of imposter scams: Family Emergency Imposter Scams, Tech Support Imposter Scams, Online Romance Imposter Scams, and IRS Imposter Scams.

    The one-minute videos show how people are targeted, how to spot the scam, and where to report it. The articles are part of the agency’s ongoing Pass It On campaign, which encourages older adults to help raise awareness about fraud by talking to family, friends, and neighbors about avoiding common scams. Please share or use the videos and articles to pass on how to spot and avoid imposters.

    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, follow us on Twitter, read our blogs andsubscribe to press releases for the latest FTC news and resource

    Unlawful payment methods used by telemarketers

    Monday, June 27th, 2016

    The Federal Trade Commission wants businesses to know about important Telemarketing Sales Rule (TSR) amendments that are now in effect. These changes make it unlawful for telemarketers to use three types of payment methods exploited by con artists and scammers.

    As of this month, it is illegal for telemarketers to ask consumers to pay for goods or services using cash-to-cash money transfers, such as MoneyGram and Western Union provide, or by providing PIN numbers from cash reload cards such as MoneyPak, Vanilla Reload or Reloadit packs. It also is illegal for telemarketers to use unsigned checks called “remotely created payment orders” to withdraw money directly from consumers’ bank accounts.

    As detailed in a press release issued in November 2015, the FTC finalized the payment method bans amendments to the TSR late last year. Business guidance about the new bans is available.New guidance warns consumers that any telemarketer requesting payment using these methods is a scammer because the payment method is illegal.

    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, follow us on Twitter, read our blogs andsubscribe to press releases for the latest FTC news and resources.

    Contact Information

    CONSUMER FINANCIAL PROTECTION BUREAU PROPOSES RULE TO END PAYDAY DEBT TRAPS

    Thursday, June 2nd, 2016

    FOR IMMEDIATE RELEASE:
    June 2, 2016

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

    CONSUMER FINANCIAL PROTECTION BUREAU PROPOSES RULE TO END PAYDAY DEBT TRAPS
    Rule Would Require Lenders to Determine Whether Consumers Have the Ability to Repay Payday, Auto Title, and Certain Other High-Cost Loans

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today proposed a rule aimed at ending payday debt traps by requiring lenders to take steps to make sure consumers have the ability to repay their loans. The proposed rule would also cut off repeated debit attempts that rack up fees. These strong proposed protections would cover payday loans, auto title loans, deposit advance products, and certain high-cost installment and open-end loans. The CFPB is also launching an inquiry into other products and practices that may harm consumers facing cash shortfalls.

    “The Consumer Bureau is proposing strong protections aimed at ending payday debt traps,” said CFPB Director Richard Cordray. “Too many borrowers seeking a short-term cash fix are saddled with loans they cannot afford and sink into long-term debt. It’s much like getting into a taxi just to ride across town and finding yourself stuck in a ruinously expensive cross-country journey. By putting in place mainstream, common-sense lending standards, our proposal would prevent lenders from succeeding by setting up borrowers to fail.”

    Watch a video about payday lending at: https://www.youtube.com/watch?v=2PATJPkj4sw

    The proposed rule would apply to certain short-term and longer-term credit products that are aimed at financially vulnerable consumers. The Bureau has serious concerns that risky lender practices in the payday, auto title, and payday installment markets are pushing borrowers into debt traps. Chief among these concerns is that consumers are being set up to fail with loan payments that they are unable to repay. Faced with unaffordable payments, consumers must choose between defaulting, reborrowing, or skipping other financial obligations like rent or basic living expenses like food and medical care. The CFPB is concerned that these practices also lead to collateral damage in other aspects of consumers’ lives such as steep penalty fees, bank account closures, and vehicle seizures. Loans covered by the proposal include:

    • Payday and other short-term credit products: Payday loans are generally due on the borrower’s next payday, which most often is within two weeks, and typically have an annual percentage rate of around 390 percent or even higher. Single-payment auto title loans, which require borrowers to use their vehicle title for collateral, are usually due in 30 days with a typical annual percentage rate of about 300 percent. Most consumers end up rolling over these short-term loans when they come due or reborrowing within a short period of time. The consumer pays more fees and interest each time they reborrow, turning a short-term loan over time into a long-term debt trap. CFPB research shows that more than four-in-five single-payment loans are reborrowed within a month. One-in-five payday loan sequences end up in default and one-in-five single-payment auto title loan borrowers end up having their car or truck seized by the lender for failure to repay.
    • High-cost installment loans: The proposal would cover loans for which the lender charges a total, all-in annual percentage rate that exceeds 36 percent, including add-on charges, and either collects payment by accessing the consumer’s account or paycheck or secures the loan by holding the title to the consumer’s vehicle as collateral. Some of the installment loans covered by the proposal have balloon, or lump-sum, payments required after a number of interest-only payments. The Bureau’s research, which looked at loans from several payday installment lenders, found that over one-third of loan sequences end in default, sometimes after the consumer has already refinanced or reborrowed at least once. The Bureau further found that nearly one-third of auto title installment loan sequences end in default, and 11 percent end with the borrower’s car being seized by the lender.

    A summary of CFPB research on payday and installment loans is available at: http://files.consumerfinance.gov/f/documents/Payday_Loans_Highlights_From_CFPB_Research.pdf

    Proposal to End Debt Traps
    The CFPB is proposing a rule that would put an end to the risky practices in these markets that trap consumers in debt they cannot afford. The proposed ability-to-repay protections include a “full-payment” test that would require lenders to determine upfront that consumers can afford to repay their loans without reborrowing. The proposal includes a “principal payoff option” for certain short-term loans and two less risky longer-term lending options so that borrowers who may not meet the full-payment test can access credit without getting trapped in debt. Lenders would be required to use credit reporting systems to report and obtain information on certain loans covered by the proposal. The proposal would also limit repeated debit attempts that can rack up more fees and may make it harder for consumers to get out of debt.

    Specifically, the proposal includes the following protections:

    • Full-payment test: Under the proposed full-payment test, lenders would be required to determine whether the borrower can afford the full amount of each payment when it’s due and still meet basic living expenses and major financial obligations. For short-term loans and installment loans with a balloon payment, full payment means affording the total loan amount and all the fees and finance charges without having to reborrow within the next thirty days. For payday and auto title installment loans without a balloon payment, full payment means affording all of the payments when due. The proposal would further protect against debt traps by making it difficult for lenders to push distressed borrowers into reborrowing or refinancing the same debt. The proposal also would cap the number of short-term loans that can be made in quick succession.
    • Principal payoff option for certain short-term loans: Under the proposal, consumers could borrow a short-term loan up to $500 without the full-payment test as part of the principal payoff option that is directly structured to keep consumers from being trapped in debt. Lenders would be barred from offering this option to consumers who have outstanding short-term or balloon-payment loans or have been in debt on short-term loans more than 90 days in a rolling 12-month period. Lenders would also be barred from taking an auto title as collateral. As part of the principal payoff option, a lender could offer a borrower up to two extensions of the loan, but only if the borrower pays off at least one-third of the principal with each extension.
    • Less risky longer-term lending options: The proposal would also permit lenders to offer two longer-term loan options with more flexible underwriting, but only if they pose less risk by adhering to certain restrictions. The first option would be offering loans that generally meet the parameters of the National Credit Union Administration “payday alternative loans” program where interest rates are capped at 28 percent and the application fee is no more than $20. The other option would be offering loans that are payable in roughly equal payments with terms not to exceed two years and with an all-in cost of 36 percent or less, not including a reasonable origination fee, so long as the lender’s projected default rate on these loans is 5 percent or less. The lender would have to refund the origination fees any year that the default rate exceeds 5 percent. Lenders would be limited as to how many of either type of loan they could make per consumer per year.
    • Debit attempt cutoff: Under the proposal, lenders would have to give consumers written notice before attempting to debit the consumer’s account to collect payment for any loan covered by the proposed rule. After two straight unsuccessful attempts, the lender would be prohibited from debiting the account again unless the lender gets a new and specific authorization from the borrower. Repeated unsuccessful withdrawal attempts by lenders to collect payment from consumers’ accounts pile on insufficient fund fees from the bank or credit union, and can result in returned payment fees from the lender. A CFPB study found that, over a period of 18 months, half of online borrowers had at least one debit attempt that overdrafted or failed, and more than one-third of borrowers with a failed payment lost their account.

    This proposed rulemaking is the latest step in the CFPB’s efforts to reform the markets for these payday and installment loan products. The Bureau already exerts supervisory oversight of payday lenders and takes enforcement actions as appropriate to address violations of the law. With its action today, the Bureau continues to seek input from a wide range of stakeholders by inviting the public to submit written comments on the proposed rule once it is published in the Federal Register. Comments on the proposal are due on Sept. 14, 2016 and will be weighed carefully before final regulations are issued.

    A factsheet summarizing the proposed rule is available at: http://files.consumerfinance.gov/f/documents/CFPB_Proposes_Rule_End_Payday_Debt_Traps.pdf

    The CFPB’s proposal is available at: http://files.consumerfinance.gov/f/documents/Rulemaking_Payday_Vehicle_Title_Certain_High-Cost_Installment_Loans.pdf

    Inquiry into Emerging Risks
    Today, the CFPB is also launching an inquiry into other potentially high-risk loan products and practices that are not specifically covered by the proposed rule. The Request for Information is focused on:

    • Concerns about risky products not covered: The Bureau is seeking information about forms of non-covered loans such as high-cost, longer-duration installment loans and open-end lines of credit where the lender does not take a vehicle title as collateral or gain account access. The CFPB’s inquiry seeks information about the range and volume of installment and open-end credit products that are offered in this market, their pricing structures, and lenders’ practices with regard to underwriting. The Bureau is also interested in learning whether these loans keep borrowers in long-term debt with a structure where borrowers pay down little to no principal for an extraordinarily long period.
    • Concerns about risky practices not covered: The Bureau seeks to learn more about practices that can impact borrowers’ ability to pay back their debt. This includes methods lenders may use to seize borrowers’ wages, funds, vehicles, or other forms of personal property in a way that could pose consumer protection concerns. The Bureau is also interested in learning more about the sales and marketing practices of credit insurance, debt suspension or debt cancellation agreements, and other add-on products. Other practices subject to the inquiry include loan churning, default interest rates, teaser rates, prepayment penalties, and late-payment penalties.

    Comments on the Request for Information are due on Oct. 14, 2016.

    The Request for Information is available at: http://files.consumerfinance.gov/f/documents/RFI_Payday_Loans_Vehicle_Title_Loans_Installment_Loans_Open-End_Credit.pdf

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    The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

    More re fake debt collectors

    Tuesday, May 24th, 2016

    Fake Debt Collectors Phish for Personal Info; Know the Red Flags with BBB Tips

     

     

    May 23, 2016

    past due noticeBetter Business Bureau of Central New England has received several reports from local consumers reporting contact from dishonest callers claiming to be collecting outstanding debts. A common scam, victims receive calls demanding immediate payment or request for personal financial information, failure to comply may results in threats of arrest, jail time, garnished wages or calls to your family or employer. BBB wants locals to know the red flags of this scam and their rights when it comes to debt collection practices.

    “The calls are often threatening in nature and request immediate action,” said Nancy B. Cahalen, President and CEO of the Better Business Bureau of Central New England. “The callers don’t know if you actually owe a debt, but they hope that the threat of serious consequences will be enough to take action without investigating the matter. This is a huge red flag, any legitimate caller should give you time to review and follow up.” Typically you will receive a call claiming to be collecting overdue payments. When you start to press for more details or perhaps deny the debt the caller becomes aggressive and hostile. Despite the threats, the callers do not have any power to have you arrested or to enforce any other consequence. In many cases, the overdue bills do not exist. Even if you do owe debts, there are rules that all debt collectors must follow.

    BBB has tips to deal with intimidating phone calls. The best protection against debt collection scams is simply knowing your rights. Here’s a quick overview.

    • Ask the debt collector to provide official “validation notice” of the debt. Debt collectors are required by law to provide the information in writing. The notice must include the amount of the debt, the name of the creditor and a statement of your rights under the Fair Debt Collection Practices Act. If the self-proclaimed collector won’t provide the information, hang up.
    • If you think that a caller may be a fake, ask for his name, company, street address, and telephone number. Then, confirm that the collection agency is real by contacting your BBB or through an internet search.
    • Do not provide or confirm any bank account, credit card or other personal information over the phone until you have verified the call.
    • Check your credit report for by going to annualcreditreport.com or calling (877) 322-8228. This will help you determine if you have outstanding debts or if there has been suspicious activity under your name.
    • Tell your loved one to place a fraud alert on his/her credit report. If scammers mention family members and  have information like their name, relationship and phone number, they probably have a lot more.
    • File a complaint with the Federal Trade Commission if the caller uses threats. The Fair Debt Collection Practices Act prohibits debt collections from being abusive, unfair or deceptive

    Second mortgages/ home equity lines of credit

    Thursday, May 19th, 2016

    Please contact us if someone is trying to collect an Illinois second mortgage or home equity line of credit.

    Trustmark Recovery

    Tuesday, May 10th, 2016

    Please contact us if Trustmark Recovery is attempting to collect money from you.