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

Contact Us

Archives

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

  • Areas & Topics

    Frquently Asked Questions

    Our Office Location

    Edelman, Combs, Latturner, & Goodwin, LLC

    20 South Clark Street
    Suite 1500
    Chicago, IL 60603

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


    E-mail Us  |  Chicago Law Office

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

    Archive

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS CITI SUBSIDIARIES TO PAY $28.8 MILLION FOR GIVING THE RUNAROUND TO BORROWERS TRYING TO SAVE THEIR HOMES

    Monday, January 23rd, 2017

    FOR IMMEDIATE RELEASE:
    January 23, 2017

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

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS CITI SUBSIDIARIES TO PAY $28.8 MILLION FOR GIVING THE RUNAROUND TO BORROWERS TRYING TO SAVE THEIR HOMES
    Mortgage Servicers Kept Borrowers in the Dark About Options, Demanded Excessive Paperwork

    Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took separate actions against CitiFinancial Servicing and CitiMortgage, Inc. for giving the runaround to struggling homeowners seeking options to save their homes. The mortgage servicers kept borrowers in the dark about options to avoid foreclosure or burdened them with excessive paperwork demands in applying for foreclosure relief. The CFPB is requiring CitiMortgage to pay an estimated $17 million to compensate wronged consumers, and pay a civil penalty of $3 million; and requiring CitiFinancial Services to refund approximately $4.4 million to consumers, and pay a civil penalty of $4.4 million.

    “Citi’s subsidiaries gave the runaround to borrowers who were already struggling with their mortgage payments and trying to save their homes,” said CFPB Director Richard Cordray. “Consumers were kept in the dark about their options or burdened with excessive paperwork. This action will put money back in consumers’ pockets and make sure borrowers can get help they need.” 

    CitiFinancial Servicing
    CitiFinancial Servicing is made up of four entities incorporated in Delaware, Minnesota, and West Virginia, and headquartered in O’Fallon, Mo. All are direct subsidiaries of CitiFinancial Credit Company, and an indirect subsidiary of New York-based Citigroup, Inc. As a mortgage servicer, CitiFinancial Servicing collects payments from borrowers for loans it originates. It also handles customer service, collections, loan modifications, and foreclosures.

    CitiFinancial Servicing originates and services residential daily simple interest mortgage loans. With these loans, the interest amount due is calculated on a day-to-day basis, unlike a typical mortgage, where interest is calculated monthly. With a daily simple interest loan, the consumer owes less interest and pays more toward principal when they make monthly payments before the due date. But if payments are late or irregular, more of the consumer’s payment goes to pay interest. Some consumers who notified CitiFinancial Servicing that they faced a financial hardship were offered “deferments.” This postponed the consumer’s next payment due date, and the consumer could still be considered current on payments. But CitiFinancial Servicing did not treat a deferment as a request for foreclosure relief options, also called loss mitigation options, as required by CFPB mortgage servicing rules.

    CitiFinancial Servicing violated the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on deceptive acts or practices. Specifically, CitiFinancial Servicing:

    • Kept consumers in the dark about foreclosure relief options: When borrowers applied to have their payments deferred, CitiFinancial Servicing failed to consider it as a request for foreclosure relief options. As a result, borrowers may have missed out on options that may have been more appropriate for them. Such requests for foreclosure relief trigger protections required by CFPB mortgage servicing rules. The rules include helping borrowers complete their applications and considering them for all available foreclosure relief alternatives.
    • Misled consumers about the impact of deferring payment due dates: Consumers were kept in the dark about the true impact of postponing a payment due date. CitiFinancial Servicing misled borrowers into thinking that if they deferred the payment, the additional interest would be added to the end of the loan rather than become due when the deferment ended. In fact, the deferred interest became due immediately. As a result, more of the borrowers’ payment went to pay interest on the loan instead of principal when they resumed making payments. This made it harder for borrowers to pay down their loan principal.
    • Charged consumers for credit insurance that should have been canceled: Some borrowers bought CitiFinancial Servicing credit insurance, which is meant to cover the loan if the borrower can’t make the payments. Borrowers paid the credit insurance premium as part of their mortgage payment. Under its terms, CitiFinancial Servicing was supposed to cancel the insurance if the borrower missed four or more monthly payments. But between July 2011 and April 30, 2015, about 7,800 borrowers paid for credit insurance that CitiFinancial Servicing should have canceled under those terms. These payments were still directed to insurance premiums instead of unpaid interest, making it harder for borrowers to pay down their loan principal.
    • Prematurely canceled credit insurance for some borrowers: CitiFinancial Servicing prematurely canceled credit insurance for some consumers. Some of those borrowers later had claims denied because CitiFinancial Servicing had improperly canceled their insurance.
    • Sent inaccurate consumer information to credit reporting companies: CitiFinancial Servicing incorrectly reported some settled accounts as being charged off. A charged-off account is one the bank deems unlikely to be repaid, but may sell to a debt buyer. At times, the servicer continued to send inaccurate information about these accounts to credit reporting companies, and didn’t correct bad information it had already sent.
    • Failed to investigate consumer disputes: CitiFinancial did not investigate consumer disputes about incorrect information sent to credit reporting companies within the required time period. In some instances, they ignored a “notice of error” sent by consumers, which should have stopped the servicer from sending negative information to credit reporting companies for 60 days.

    Under the consent order, CitiFinancial Servicing must:

    • Pay $4.4 million in restitution to consumers: CitiFinancial Services must pay $4.4 million to wronged consumers who were charged premiums on credit insurance after it should be been canceled, or who were denied claims for insurance that was canceled prematurely.
    • Clearly disclose conditions of deferments for loans: CitiFinancial Servicing must make clear to consumers that interest accruing on daily simple interest loans during the deferment period becomes immediately due when the borrower resumes making payments. This means more of the borrowers’ loan payment will go toward paying interest instead of principal. CitiFinancial Servicing must also treat a consumer’s request for a deferment as a request for a loss mitigation option under the Bureau’s mortgage servicing rules.
    • Stop supplying bad information to credit reporting companies: CitiFinancial Servicing must stop reporting settled accounts as charged off to credit report companies, and stop sending negative information to those companies within 60 days after receiving a notice of error from a consumer. CitiFinancial Servicing must also investigate direct disputes from borrowers within 30 days.
    • Pay a civil money penalty: CitiFinancial Servicing must pay $4.4 million to the CFPB Civil Penalty Fund for illegal acts. 

    The consent order against Citi Financial Services is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiFinancial-consent-order.pdf

    CitiMortgage
    CitiMortgage is incorporated in New York, headquartered in O’Fallon, Mo., and is a subsidiary of Citibank, N.A. CitiMortgage is a mortgage servicer for Citibank and government-sponsored entities such as Fannie Mae and Freddie Mac. It also fields consumer requests for foreclosure relief, such as repayment plans, loan modification, or short sales.

    Borrowers at risk of foreclosure or otherwise struggling with their mortgage payments can apply to their servicer for foreclosure relief. In this process, the servicer requests documentation of the borrower’s finances for evaluation. Under CFPB rules, if a borrower does not submit all the required documentation with the initial application, servicers must let the borrowers know what additional documents are required and keep copies of all documents that are sent.

    However, some borrowers who asked for assistance were sent a letter by CitiMortgage demanding dozens of documents and forms that had no bearing on the application or that the consumer had already provided. Many of these documents had nothing to do with a borrower’s financial circumstances and were actually not needed to complete the application. Letters sent to borrowers in 2014 requested documents with descriptions such as “teacher contract,” and “Social Security award letter.” CitiMortgage sent such letters to about 41,000 consumers.

    In doing so, CitiMortgage violated the Real Estate Settlement Procedures Act, and the Dodd-Frank Act’s prohibition against deceptive acts or practices. Under the terms of the consent order, CitiMortgage must:

    • Pay $17 million to wronged consumers: CitiMortgage must pay $17 million to  approximately 41,000 consumers who received improper letters from CitiMortgage. CitiMortgage must identify affected consumers and mail each a bank check of the amount owed, along with a restitution notification letter.
    • Clearly identify documents consumers need when applying for foreclosure relief: If it does not get sufficient information from borrowers applying for foreclosure relief, CitiMortgage must comply with the Bureau’s mortgage servicing rules. The company must clearly identify specific documents or information needed from the borrower and whether any information needs to be resubmitted. Or it must provide the forms that a borrower must complete with the application, and describe any documents borrowers have to submit.
    • Freeze any foreclosures related to the flawed application process and reach out to harmed consumers: For consumers covered under the order who never received a decision on their application, CitiMortgage must stop all foreclosure-related activity, and reach out to these borrowers to determine if they want foreclosure relief options.
    • Pay a civil money penalty: CitiMortgage must pay $3 million to the CFPB Civil Penalty Fund for illegal acts.

    The consent order reflects that CitiMortgage took affirmative steps to reach out to some borrowers before it may have been required to by CFPB rules. While those borrowers also would have benefited from more tailored and accurate notices, and the institution will provide compliant notices to them going forward, those individuals were not included the affected group of consumers in this settlement. This will avoid penalizing the institution for making additional effort, which the Bureau encourages other institutions to make as well.   

    The consent order against CitiMortgage is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_CitiMortgage-consent-order.pdf

    ###

    Uber Agrees to Pay $20 Million to Settle FTC Charges That it Recruited Prospective Drivers with Exaggerated Earnings Claims

    Thursday, January 19th, 2017

    Agency also alleges Uber misled drivers about its vehicle financing program

    Uber Technologies, the San Francisco-based ride-hailing company, has agreed to pay $20 million to resolve Federal Trade Commission charges that it misled prospective drivers with exaggerated earning claims and claims about financing through its Vehicle Solutions Program. The $20 million will be used to provide refunds to affected drivers across the country.

    “Many consumers sign up to drive for Uber, but they shouldn’t be taken for a ride about their earnings potential or the cost of financing a car through Uber,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “This settlement will put millions of dollars back in Uber drivers’ pockets.”

    According to the FTC’s complaint, in its efforts to attract prospective drivers, Uber exaggerated the yearly and hourly income drivers could make in certain cities, and misled prospective drivers about the terms of its vehicle financing options.

    The FTC alleges that Uber claimed on its website that uberX drivers’ annual median income was more than $90,000 in New York and over $74,000 in San Francisco. The FTC alleges, however, that drivers’ annual median income was actually $61,000 in New York and $53,000 in San Francisco.  In all, less than 10 percent of all drivers in those cities earned the yearly income Uber touted. The FTC also alleges that Uber made high hourly earnings claims in job listings, including on Craigslist, but that the typical Uber driver failed to earn those advertised hourly amounts in various cities.

    The complaint also alleges that Uber claimed its Vehicle Solutions Program would provide drivers with the “best financing options available,” regardless of the driver’s credit history, and told consumers they could “own a car for as little as $20/day” ($140/week) or lease a car with “payments as low as $17 per day” ($119/week), and “starting at $119/week.” Despite Uber’s claims, from at least late 2013 through April 2015, the median weekly purchase and lease payments exceeded $160 and $200, respectively, the FTC alleges. Uber failed to control or monitor the terms and conditions of the auto financing agreements through its program and in fact, its drivers received worse rates on average than consumers with similar credit scores typically would obtain, according to the FTC’s complaint. In addition, Uber claimed its drivers could receive leases with unlimited mileage through its program when in fact, the leases came with mileage limits, the FTC alleges.

    In addition to imposing a $20 million judgment against Uber, the stipulated order prohibits the company from misrepresenting drivers’ earnings and auto finance and lease terms. The order also bars Uber from making false, misleading, or unsubstantiated representations about drivers’ income; programs offering or advertising vehicles or vehicle financing or leasing; and the terms and conditions of any vehicle financing or leasing.

    The Commission vote authorizing the staff to file the complaint and proposed stipulated order was 2-1. Commissioner Maureen K. Ohlhausen dissented and issued a statement. The documents were filed in the U.S. District Court for the Northern District of California.

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

     

    CONSUMER FINANCIAL PROTECTION BUREAU SUES TCF NATIONAL BANK FOR TRICKING CONSUMERS INTO COSTLY OVERDRAFT SERVICE

    Thursday, January 19th, 2017

    FOR IMMEDIATE RELEASE:
    January 19, 2017

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

    CONSUMER FINANCIAL PROTECTION BUREAU SUES TCF NATIONAL BANK FOR TRICKING CONSUMERS INTO COSTLY OVERDRAFT SERVICE

    Bank Obscured Fees, Adopted Loose Definition of Consent to Preserve Overdraft Revenue

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) is suing TCF National Bank for tricking consumers into costly overdraft services. Banks cannot charge overdraft fees on one-time debit purchases and ATM withdrawals without a consumer’s consent. The Bureau alleges that TCF designed its application process to obscure the fees and make overdraft seem mandatory for new customers to open an account. The CFPB also believes that TCF adopted a loose definition of consent for existing customers in order to opt them into the service and pushed back on any customer who questioned the process. Today’s lawsuit seeks redress for consumers, an injunction to prevent future violations, and a civil money penalty.

    “Today we are suing TCF for tricking consumers into costly overdraft services in order to preserve its bottom line,” said CFPB Director Richard Cordray. “‎TCF bulldozed its way through protections against automatic overdraft enrollment and then celebrated its unusual sign-up success. With today’s action, we are standing up for consumers’ right to understand and choose what services they receive.”

    TCF National Bank, headquartered in Wayzata, Minn., operates approximately 360 retail branches across Minnesota, Wisconsin, Illinois, Michigan, Colorado, Arizona, and South Dakota. Among its various products, TCF offers checking accounts and charges about $35 every time a consumer overdrafts by spending or withdrawing more money than is available.

    With the advent and growth of debit cards, overdraft was transformed from an occasional courtesy which banks extended to avoid bouncing checks, to a significant source of industry revenues. In 2010, federal rules took effect that prohibited depository institutions from charging overdraft fees on ATM and one-time debit card transactions – such as swiping a debit card at a store – unless consumers affirmatively opted in. If consumers don’t opt in, banks may decline the transaction, but can’t charge a fee. The “opt-in” rule affected both new accounts and existing accounts.

    As described in the Bureau’s complaint, TCF relied on overdraft fee revenue to a greater degree than most other banks its size and recognized early on that the opt-in rule could negatively impact its business. In late 2009, it estimated that approximately $182 million in annual revenue was “at risk” because of the opt-in rule. It began consumer testing that same year. Through this testing, the bank determined that the less information it gave consumers about opting in, the more likely consumers would opt in.

    The Bureau’s complaint alleges that TCF’s strategy also consisted of bonuses to branch staff who got consumers to sign on. For example, in 2010, branch managers at the larger branches could earn up to $7,000 in bonuses for getting a high number of opt-ins on new checking accounts. After the bank phased out the bonuses, certain regional managers instituted opt-in goals for branch employees. Staff had to achieve extremely high opt-in rates of 80 percent or higher for all new accounts. While the bank’s official policy was that an employee could not be terminated for low opt-in rates, many employees still believed they could lose their job if they did not meet their sales goals. 

    The Bureau alleges that the bank’s strategy worked and that by mid-2014, about 66 percent of the bank’s customers had opted in, a rate more than triple that of other banks. According to the Bureau’s complaint, the chief executive officer of the bank even named his boat the “Overdraft.” TCF’s senior executives were so pleased with the bank’s effectiveness at convincing consumers to opt in that they had parties to celebrate reaching milestones, such as getting 500,000 consumers to sign up.

    Today’s lawsuit alleges that TCF was in violation of the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Specifically, the CFPB alleges that the bank:

    • Tricked new customers into believing optional overdraft was mandatory and obscured fees: The bank determined through consumer testing that if new customers were asked to opt in at the same time they were being asked to agree to other mandatory terms and conditions of a new account, the opt-in rate more than doubled. So it placed the opt-in decision immediately after a series of mandatory items the consumer had to agree to in order open the account, rather than at the time they received the mandatory notice about their opt-in rights. The bank then provided branch employees with scripts that did not explain that opting in was optional or that it amounted to giving the bank permission to authorize transactions that would result in fees. Most consumers fell into the rhythm of initialing the terms of the agreement and signed on.
    • Adopted a loose definition of consent to opt in existing customers: TCF also ran a campaign to get customers who already had an account to opt in. TCF branch employees called those existing customers using a script the bank had provided. Instead of asking consumers whether they wanted to have their overdrafts covered for a $35 charge, staff was instructed to ask customers whether they wanted their “TCF Check Card to continue to work as it does today?” Many consumers did not understand that by choosing to have their debit card “continue to work as it does today,” they were granting the bank permission to authorize transactions and charge them overdraft fees that they would otherwise not have to pay.
    • Pushed back on consumers who challenged opting in by using emotionally charged hypotheticals: TCF consistently instructed its staff not to “over explain” the terms and conditions of its opt-in program. If new or existing consumers challenged or questioned opting in, the bank instructed its staff to sell the product by suggesting a hypothetical situation, such as an emergency with high stakes where they would desperately need access to money.

    The suit seeks redress for consumers, injunctive relief, and penalties. The Bureau’s complaint is not a finding or ruling that the defendants have actually violated the law.

    A copy of the complaint is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_TCF-National-Bank-complaint.pdf

    A CFPB consumer advisory on overdraft issues, first released in 2015, can be found at:  http://files.consumerfinance.gov/f/201504_cfpb_consumer-advisory_overdraft.pdf

    Prepared Remarks of Richard Cordray Director of the Consumer Financial Protection Bureau Navient Enforcement Action Press Call

    Wednesday, January 18th, 2017

    FOR IMMEDIATE RELEASE:
    January 18, 2017

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

    Prepared Remarks of Richard Cordray

    Director of the Consumer Financial Protection Bureau 

    Navient Enforcement Action Press Call

    Washington, D.C.

    January 18, 2017

    Today the Consumer Financial Protection Bureau is filing a lawsuit against Navient (formerly part of Sallie Mae), which is the nation’s largest servicer of both federal and private student loans. From our extensive investigation of the matter, we found that Navient has systematically and illegally failed borrowers at every stage of repayment. Among other things, we found that Navient created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. The company also used shortcuts and deception to illegally cheat struggling borrowers out of their rights to lower payments, which caused them to pay much more than they had to for their loans. These unlawful practices have cost student loan borrowers across the country both heartache and money. And we are working to make sure they do not happen again.

    Navient currently services the student loan accounts of more than 12 million borrowers, over half of them under its contract with the Department of Education. Altogether, it services more than $300 billion in federal and private student loans, which is more than one-in-four borrowers in this country. Today’s lawsuit names as defendants Navient Corporation, Navient Solutions, and Pioneer Credit Recovery, a unit of Navient that specializes in collecting on defaulted loans.

    Student loan servicers play a critical role for student loan borrowers because they bear responsibility for managing the loans. They are the link between the borrower and the owner of the loan, though in many cases they may own the loan themselves. They communicate directly with borrowers, collect and apply payments, and can help work out modifications to the loan terms. Importantly, in this marketplace, consumers cannot easily take their business elsewhere. Instead, they are simply stuck with their student loan servicer, whether they are being treated well or poorly.

    At every stage of repayment on student loans, Navient has failed to follow the law and caused borrowers needless anxiety and aggravation. Borrowers and the CFPB have reason to expect better from the nation’s largest student loan servicer. As soon as borrowers are required to start paying back their loans, they find that they must deal with their student loan servicers. Servicers are supposed to follow instructions from the borrower about how to allocate payments across what often are multiple student loans. We believe that Navient repeatedly creates obstacles to repayment by misallocating or misapplying payments. The company all too often fails to correct its errors unless a consumer stays vigilant, discovers the problem, and contacts the company to insist that it be fixed.

    Navient also illegally steers vulnerable borrowers toward options that may cost more. Since 2009, federal student loan borrowers facing financial hardship have had the right under federal law to make student loan payments based on how much money they earn and their family size. These are known as income-driven repayment plans. For borrowers who are unemployed or have low incomes, these government-supported plans can offer as little as a zero-dollar monthly payment. Since Congress first expanded access to these protections, a wide range of federal regulators and agencies, including the Department of Education, the Consumer Bureau, the Treasury Department, the FDIC, and the Department of Justice, have repeatedly made it clear that we expect all student loan servicers to give consumers a fair shot at repaying their loans. This includes helping consumers understand and enroll in income-driven repayment plans, as well as other programs and benefits available to consumers that can reduce their interest payments or lead to loan forgiveness.

    But the CFPB found in its investigation, and now alleges in its lawsuit, that Navient all too often fails to help consumers understand that they can peg their student loan payments to their current income and household size. Instead, it often steers consumers toward a short-term solution that allows borrowers to take a temporary break from making payments, known as “forbearance.” With forbearance, borrowers can temporarily suspend making monthly payments, but their debt continues to grow as the unpaid interest is added to the loan. It is typically not suitable for borrowers who are facing long-term financial hardship. And the longer a borrower is in forbearance, the more their loan balance increases.

    For servicers, enrolling troubled borrowers in forbearance is generally easier to process than an income-driven repayment plan. An income-driven repayment plan involves paperwork and longer discussions. Forbearance can take just a few minutes and often avoids the submission of any paperwork. Forbearance is thus a cheaper approach that saves Navient money.

    But while steering borrowers into forbearance might reduce operating costs and thus could boost profits for Navient, it costs consumers real money. From January 2010 to March 2015, the company added up to $4 billion – that is with a “B” – in extra interest charges to the principal balances of loans that were repeatedly enrolled in forbearance. Over this period, many affected borrowers contacted Navient multiple times for help, and Navient responded by extending the length of their forbearance. At any point in this process, Navient could have helped eligible borrowers get started instead on an income-driven repayment plan, but Navient failed to do so.

    We also found and now allege that for borrowers who successfully enrolled in an income-driven repayment plan, Navient obscured the information that borrowers needed to maintain their lower payments. These borrowers must certify their income and family size annually, but Navient’s emails and annual renewal notices failed to adequately inform them of critical deadlines or the consequences if they failed to act. We believe that Navient’s failure to provide adequate notices contributed to borrowers not renewing their enrollment on time, causing their affordable monthly payments to expire. When this happens, a borrower’s monthly payment can jump by hundreds of dollars, the principal balance may increase by thousands of dollars, and they may also forfeit other benefits, such as interest subsidies and progress toward loan forgiveness.

    We determined that even for borrowers whose loans had been discharged, Navient continued to harm them. Specifically, we are talking about borrowers who are totally and permanently disabled, including American military veterans who were disabled during their military service. As you may be aware, student loan payments are reported to the credit reporting companies. When borrowers default or run into trouble in repaying their loans, reporting this information can damage their credit profile and prevent them from being able to take out future loans.

    Federal student loan borrowers who are severely and permanently disabled have a right to seek loan forgiveness under the federal discharge program for Total and Permanent Disability. We found in our investigation and now allege that Navient misreported to the credit reporting companies by using a reporting code for disabled borrowers that was meant to be used only in cases of default. When loan defaults show up on a credit report, it damages the borrower’s credit and can cause severe harm by preventing people from buying a home, leasing a car, or even renting an apartment or passing a criminal background check. Our country’s veterans and disabled borrowers deserve better.

    What makes many of these illegal practices even more troubling is that our investigation showed that poor treatment of student loan borrowers was institutionalized at every stage of repayment at Navient. The company simply failed to invest the time and effort necessary to help financially distressed borrowers. Shirking its responsibilities, Navient chose to shortcut its obligations as a servicer in favor of making its job easier, quicker, and less costly.

    Struggling borrowers have paid a heavy price for having their loans serviced by Navient. For those who were steered into forbearance, they saw their debt increase. Navient failed to adhere to its obligation to help borrowers navigate the numerous available options and identify the repayment plans that best suited their individual circumstances.

    To remedy these wrongs, the Bureau is seeking redress for consumers who were harmed by Navient’s illegal practices. We are also seeking to prohibit Navient from committing illegal conduct in the future and thereby prevent new borrowers from being similarly harmed.

    Student loans make up the nation’s second largest consumer debt market after mortgages. Today we have over 44 million federal and private student loan borrowers, who collectively owe about $1.4 trillion. There is growing evidence that a strain of this magnitude threatens the economic security of vast numbers of young Americans, and growing numbers of older Americans as well. Significant debt loads can have a domino effect on the major choices people make in their lives: what job to take and whether to move, buy a home, or even get married.

    There is no doubt that breakdowns in student loan servicing are partly responsible for borrowers, now totaling more than 8 million, who are currently estimated to be in default on over $130 billion in student loans. The lawsuit we are filing today seeks to address some of these breakdowns at Navient, with the goal of protecting consumers from harm caused by the company’s violations of federal consumer financial laws.

    And now I will turn it over to Attorney General Madigan and  Senior Counsel Smith. It is my honor to be working alongside them on this matter. Together, their states have  been leaders in standing up for student loan borrowers. Illinois and Washington are among our toughest and most effective advocates for consumers, and their work on behalf of those with student loans has inspired and informed our own mission at the CFPB. Thank you.

    #

    FTC Halts Scheme That Advertised Phony Rental Properties and ‘Free’ Credit Reports to Enroll Consumers in Costly Credit Monitoring Service

    Wednesday, January 18th, 2017

    FTC Halts Scheme That Advertised Phony Rental Properties and ‘Free’ Credit Reports to Enroll Consumers in Costly Credit Monitoring Service

    FOR RELEASE

    The Federal Trade Commission has charged Credit Bureau Center LLC and three individuals with luring consumers with fake rental property ads and deceptive promises of “free” credit reports into signing up for a costly credit monitoring service.

    At the FTC’s request, a federal court temporarily halted the operation, which has raked in millions of dollars. The agency seeks to permanently stop the allegedly illegal practices and return money to consumers.

    According to the FTC’s complaint, the defendants placed Craigslist ads for rental properties that did not exist or that they were not authorized to offer for rent. When people responded to the ads, the defendants impersonated property owners and sent emails offering property tours if consumers would first obtain their credit reports and scores from the defendants’ websites. These sites claimed to provide “free” credit reports and scores, but then enrolled consumers in a credit monitoring service with continuing $29.95 monthly charges. Many people did not realize they had been enrolled until they noticed unexpected charges on their bank or credit card statements, sometimes after several billing cycles.

    The complaint also alleges that consumers who obtained their credit reports and scores never got the promised property tours, and that their emails to the purported property owner to arrange the tours went unanswered.

    The defendants are Credit Bureau Center LLC, formerly known as MyScore LLC and also doing business as eFreeScore.com, CreditUpdates.com, and FreeCreditNation.com; its owner, Michael Brown; and Danny Pierce and Andrew Lloyd, whose deceptive ads and emails allegedly drove consumers to Credit Bureau Center’s websites. All four defendants are charged with violating the FTC Act. Credit Bureau Center and Brown are also charged with violating the Restore Online Shoppers’ Confidence Act, the Fair Credit Reporting Act, and the Free Reports Rule, which requires that consumers be informed of their right to obtain free credit reports from AnnualCreditReport.com or 877-322-8228.

    The FTC would like to thank the California Attorney General’s Office and the Better Business Bureau of Los Angeles and Silicon Valley for their assistance in this case.

    The Commission vote approving the complaint was 3-0. The U.S. District Court for the Northern District of Illinois entered a temporary restraining order against the defendants on January 11, 2017.

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

     

    CONSUMER FINANCIAL PROTECTION BUREAU SUES NATION’S LARGEST STUDENT LOAN COMPANY NAVIENT FOR FAILING BORROWERS AT EVERY STAGE OF REPAYMENT

    Wednesday, January 18th, 2017

    FOR IMMEDIATE RELEASE:
    January 18, 2017

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

    CONSUMER FINANCIAL PROTECTION BUREAU SUES NATION’S LARGEST STUDENT LOAN COMPANY NAVIENT FOR FAILING BORROWERS AT EVERY STAGE OF REPAYMENT
    Navient, Formerly Part of Sallie Mae, Illegally Cheated Borrowers Out of Repayment Rights Through Shortcuts and Deception

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) is suing the nation’s largest servicer of both federal and private student loans for systematically and illegally failing borrowers at every stage of repayment. For years, Navient, formerly part of Sallie Mae, created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. Through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans. The Bureau seeks to recover significant relief for the borrowers harmed by these illegal servicing failures.

    “For years, Navient failed consumers who counted on the company to help give them a fair chance to pay back their student loans,” said CFPB Director Richard Cordray. “At every stage of repayment, Navient chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because Navient illegally cheated them and today’s action seeks to hold them accountable.”

    Formerly part of Sallie Mae, Inc., Navient is the largest student loan servicer in the United States. It services the loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. Altogether, it services more than $300 billion in federal and private student loans. Named in today’s lawsuit are Navient Corporation and two of its subsidiaries: Navient Solutions is a division responsible for loan servicing operations; Pioneer Credit Recovery specializes in the collection of defaulted student loans.

    Servicers are a critical link between borrowers and lenders. They manage borrowers’ accounts, process monthly payments, and communicate directly with borrowers. When facing unemployment or other financial hardship, borrowers rely on their student loan servicer to help them enroll in alternative repayment plans or request a modification of loan terms. A servicer is often different from the lender, and borrowers typically have no control over which company is assigned to service their loans.

    Starting in 2009, the vast majority of federal student loan borrowers gained a right to make payments based on how much money they earn by enrolling in repayment arrangements known as income-driven repayment plans. These plans are part of the federal government’s effort to make student loans more affordable. For borrowers who meet certain income and family-size criteria, these plans can offer monthly payments as low as zero dollars. Another important benefit of income-driven repayment plans is that for the first three years after enrollment, many consumers are entitled to have the federal government pay part of the interest charges if they can’t keep up. All federal student loan borrowers enrolled in these plans may be eligible for loan forgiveness after 20 or 25 years of monthly payments.

    In today’s action, the Bureau alleges that Navient has failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans. Navient provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems. Critically, it systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly for certain borrowers. Specifically, among the allegations in today’s lawsuit, the Bureau charges that Navient:

    • Fails to correctly apply or allocate borrower payments to their accounts: As soon as a borrower begins to pay back their loans, student loan servicers are supposed to take a borrower’s payment and follow instructions from the borrower about how to apply it across their multiple loans. Navient repeatedly misapplies or misallocates payments — often making the same error multiple times over many months. The company all too often fails to correct its errors unless a consumer discovers the problem and contacts the company.
    • Steers struggling borrowers toward paying more than they have to on loans: When borrowers run into trouble repaying their federal student loans, they have a right under federal law to apply for repayment plans that allow for a lower monthly payment. But the Bureau believes that Navient steers many borrowers into forbearance, an option designed to let borrowers take a short break from making payments. But interest continues to add up during forbearance. Certain consumers with subsidized loans end up paying a heavy price because they could have potentially avoided those interest charges. From January 2010 to March 2015, the company added up to $4 billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances. The Bureau believes that a large portion of these charges could have been avoided had Navient followed the law.
    • Obscured information consumers needed to maintain their lower payments: Borrowers who successfully enroll in an income-driven repayment plan need to recertify their income and family size annually. But Navient’s emails and annual renewal notice sent to borrowers failed to adequately inform them of critical deadlines or the consequences if they failed to act. Navient also obscured its renewal notices in emails sent to borrowers that did not adequately alert them about the need to renew. Many borrowers did not renew their enrollment on time and they lost their affordable monthly payments, which could have caused their monthly payments to jump by hundreds or even thousands of dollars. When that happens, accrued interest is added to the borrower’s principal balance, and these borrowers may have lost other protections, including interest subsidies and progress toward loan forgiveness.
    • Deceived private student loan borrowers about requirements to release their co-signer from the loan: Navient told borrowers that they could apply for co-signer release if they made a certain number of consecutive, on-time payments. Even though it permits borrowers to prepay monthly installments in advance and tells customers who do prepay that they can skip upcoming payments, when borrowers did so, Navient reset the counter on the number of consecutive payments they made to zero. So borrowers who tried to get ahead of their loans and prepay would have been denied co-signer release and had to start over.
    • Harmed the credit of disabled borrowers, including severely injured veterans: Student loan payments are reported to credit reporting companies. Severely and permanently disabled borrowers with federal student loans, including veterans whose disability is connected to their military service, have a right to seek loan forgiveness under the federal Total and Permanent Disability discharge program. Navient misreported to the credit reporting companies that borrowers who had their loans discharged under this program had defaulted on their loans when they had not. This potentially caused damage to their credit reports.

    The Bureau also alleges that Navient, through its subsidiary Pioneer, made illegal misrepresentations relating to the federal loan rehabilitation program available to defaulted borrowers. Pioneer misrepresented the effect of completing the federal loan rehabilitation program by falsely stating or implying that doing so would remove all adverse information about the defaulted loan from the borrower’s credit report. Pioneer also misrepresented the collection fees that would be forgiven upon completion of the program.

    Today’s lawsuit alleges that Navient has been in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collections Practices Act. The suit seeks redress for consumers harmed by Navient’s illegal practices. The CFPB is also seeking to keep Navient from continuing the illegal conduct described in the complaint, and to prevent new borrowers from being harmed.

    The complaint against Navient Corporation, Navient Solutions, and Pioneer Credit Recovery is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_Navient-Pioneer-Credit-Recovery-complaint.pdf

    This action comes as the Bureau takes steps to ensure that all student loan borrowers have access to adequate student loan servicing. In 2015, the Bureau released a report outlining widespread servicing failures reported by both federal and private student loan borrowers and also published a framework for student loan servicing reforms. As part of this work, the Bureau has continually raised concerns around illegal student loan servicing practices. The Bureau has called for market-wide reforms and prioritized taking action against companies that engage in illegal servicing practices.

    Student loans make up the nation’s second largest consumer debt market. Today there are more than 44 million federal and private student loan borrowers and collectively these consumers owe roughly $1.4 trillion. In a study last year, the CFPB found that more than 8 million borrowers are in default on more than $130 billion in student loans, a problem that may be driven by breakdowns in student loan servicing. Students and their families can find help on how to tackle their student debt on the CFPB’s website. Student loan borrowers experiencing problems related to repaying student loans or debt collection can also submit a complaint to the CFPB.

    More information is available at: http://www.consumerfinance.gov/students

    ###

    FTC Announces Crackdown on Two Massive Illegal Robocall Operations

    Friday, January 13th, 2017

    Web of defendants blasted billions of robocalls, including more than 70 million to numbers on National Do Not Call Registry

    The Federal Trade Commission today announced a crackdown on two massive robocall telemarketing operations, both of which have been blasting robocalls to consumers on the National Do Not Call (DNC) Registry since at least 2012.

    Many of the defendants in the two cases, FTC v. Justin Ramsey, et. al. and FTC v. Aaron Michael Jones, et. al., have agreed to court orders that permanently ban them from making robocalls, making any calls to numbers listed on the Do Not Call Registry, violating the TSR, and/or assisting others in doing so. The settling defendants also will pay the Commission a total of more than $500,000.

    “The law is clear about robocalls — if a telemarketer doesn’t have consumers’ written permission, it’s illegal to make these calls,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The FTC will continue working hard to put a stop to telemarketers who ignore the law.”

    The two ringleaders of the operations—Justin Ramsey and Aaron Michael (“Mike”) Jones—have previously been sued by state attorneys general for telemarketing violations and the FTC’s litigation against them continues.

    According to the FTC’s complaint in the Ramsey action, the defendants illegally blasted millions of robocalls in 2012 and 2013 to consumers on the DNC Registry selling home security systems or generating leads for home security installation companies. In just one week in July 2012, the defendants allegedly made more than 1.3 million illegal calls to consumers nationwide, 80 percent of which were to numbers listed on the DNC Registry.

    The FTC alleges that Ramsey continues to violate the TSR. For example, in April and May of 2016, the FTC alleges that he and his company, Prime Marketing LLC, placed at least 800,000 calls to numbers listed on the Do Not Call Registry.

    Two of Ramsey’s former business partners and their three companies have agreed to settle. In addition to the bans on robocalling, DNC and TSR violations, the court orders impose a $1.4 million judgment, which is suspended based on the defendants’ inability to pay. The full amount will become due if they are found to have misrepresented their financial condition.

    The FTC’s complaint in the Jones action charges nine individuals and 10 corporate entities with operating robocalling enterprises allegedly controlled by Mike Jones. According to the FTC’s complaint, between at least March 2009 and May 2016, the defendants made or helped to make billions of robocalls, many of which sold extended auto warranties, search engine optimization services, and home security systems, or generated leads for companies selling those goods and services. Many of those calls were to numbers on the DNC Registry.

    In just the first three months of 2014, the FTC alleges that the defendants made more than 329 million robocalls to consumers in all 50 states, including 32 million to numbers on the Do Not Call Registry. In the first quarter of 2015, the FTC alleges that the defendants blasted out 222 million calls, including 40 million to numbers on the Do Not Call Registry.

    Seven of the nine individual defendants and Local Lighthouse Corp. have agreed to court orders, which in addition to the bans on robocalling, DNC and TSR violations, include a $9.9 million monetary judgment, with all but $510,000 suspended based upon the defendants’ inability to pay. The full amount of the judgment will become due against any defendants found to have misrepresented their financial condition.

    The Commission vote authorizing staff to file the complaints and proposed stipulated federal court orders in each case was 3-0. FTC staff filed the complaint and proposed orders in FTC v. Ramsey in the U.S. District Court for the Southern District of Florida and the complaint and proposed orders in FTC v. Jones in the U.S. District Court for the Central District of California.

    NOTE: The Commission authorizes the filing of 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 SURVEY FINDS OVER ONE-IN-FOUR CONSUMERS CONTACTED BY DEBT COLLECTORS FEEL THREATENED

    Thursday, January 12th, 2017

    FOR IMMEDIATE RELEASE:
    January 12, 2017

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

    CONSUMER FINANCIAL PROTECTION BUREAU SURVEY FINDS OVER ONE-IN-FOUR CONSUMERS CONTACTED BY DEBT COLLECTORS FEEL THREATENED
    CFPB Also Releases Study of Consumer Risks in Online Debt Sales, Consumer Stories of Debt Collection Experiences

     

    Washington, D.C. – A Consumer Financial Protection Bureau (CFPB) report released today found that over one-in-four consumers contacted by debt collectors felt threatened. The report was drawn from the first-ever national survey of consumer experiences with debt collectors. Over 40 percent of consumers who said they were approached about a debt in collection requested that a creditor or collector stop contacting them. Of these consumers, three-in-four report that debt collectors did not honor their request to cease contact. The CFPB is also releasing a study of potential risks in the online debt marketplace, where consumer debts and personal information are for sale for fractions of pennies on the dollar. Finally, the CFPB is unveiling an online series of consumers’ stories about their debt collection experiences.

    “The Bureau today casts light on troubling problems in the debt collection industry,” said CFPB Director Rich Cordray. “More than one-in-four consumers report feeling threatened by a debt collector, and a majority of those contacted about debt say the calls persist even after requests to stop. The Bureau is working to clean up abuses in this industry, and to see that all consumers are treated with fairness, decency, and respect.”

    Debt collection is a multi-billion dollar industry affecting 70 million consumers who have or are contacted about a debt in collection. Banks and other original creditors may collect their own debts or hire third-party debt collectors. When they fail to collect debts on their own, they often sell these debts to debt buyers. The buyers may try to collect on these debts, or hire third-party debt collectors to do so. More than 6,000 debt collection firms are estimated to operate in the United States.

    Consumer Survey of Debt Collection Experiences
    The CFPB survey, the first of its kind, provides an in-depth analysis of consumers’ encounters with the debt collection industry. The national survey is part of an ongoing CFPB effort to explore industry practices and consumer experiences with debt collectors. Consumers were asked about their encounters with debt collectors for loans and unpaid bills. Questions included whether consumers had been contacted by debt collectors in the past year, how frequently, and the nature of the debt. 

    According to the CFPB debt collection survey, about one-third of consumers – or more than 70 million Americans – were contacted by a creditor or debt collector about a debt in the previous 12 months. Consumers are most often contacted about medical and credit card debt. The CFPB survey also found that:

    • Over one-in-four consumers report threatening contact: Twenty-seven percent of consumers approached about debt said they felt threatened by the conduct of the creditor or collector who most recently contacted them. Debt collectors are generally prohibited from tactics that tend to harass, abuse, or oppress consumers.
    • Three-in-four consumers report that debt collectors did not honor a request to cease contact: About 40 percent of consumers contacted about a debt in collection said they asked at least one debt collector or creditor to stop contacting them. Of these consumers, three-in-four said the debt collector did not honor the request to cease contact attempts.
    • More than half of consumers report incorrect contact for at least one debt: Fifty-three percent of consumers contacted about a debt in the year prior said at least one collection effort was mistaken in some way. These consumers reported that the creditor or collector sought the incorrect amount, that the debt was not owed, or that the person owing the debt was a family member.
    • Over one-third of consumers report being contacted at inconvenient times: Thirty six percent of consumers contacted about a debt in collection said that the creditor or collector who most recently contacted them called between 9 p.m. and 8 a.m. Debt collectors generally cannot call at times they know to be inconvenient unless the consumer specifically agrees to it.
    • Nearly 40 percent of consumers report that a debt collector attempted contact four or more times per week: Thirty seven percent of consumers contacted about a debt in collection report that the most recent creditor or collector to contact them usually did so four or more times in a week. About 20 percent of consumers approached by debt collectors reported contact attempts by debt collectors usually four to seven times per week. Another 17 percent said a creditor or debt collector tried contacting them eight or more times per week. 
    • One-in-seven consumers contacted about a debt report being sued: Fifteen percent of consumers contacted about a debt in collection over the prior year report being sued. The share ranges from 6 percent sued among those contacted about a single debt to 35 percent sued among consumers contacted about five or more debts. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt.

    The Consumer Experiences with Debt Collectors report is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_Debt-Collection-Survey-Report.pdf 

    To illustrate consumers’ experiences with debt collection, the CFPB today is sharing personal debt collection stories from consumers. It is part of an ongoing effort to highlight issues in the debt collection marketplace and to inform consumers about their rights. These online videos highlight consumer stories about being pursued for debts that weren’t owed, consumers who felt they were contacted too often, and consumers who were threatened with jail by debt collectors. The Bureau is encouraging more consumers to tell their stories.

    The consumer debt collection stories are available at: http://www.consumerfinance.gov/consumer-tools/everyone-has-a-story/debt-collection/

    CFPB Report On Risks in the Online Debt Sales Market
    As a further effort to inform public understanding of the debt collection industry, the Bureau is also releasing a white paper highlighting potential risks to consumers’ personal information posed by debt sales online. Many debts sold in online marketplaces come with sensitive personal information attached, and are easily available at extremely low prices. The report raises questions about protections for that information and the dangers of it falling into the wrong hands.

    When original creditors fail to collect debts on their own, they may sell the debt, sometimes for fractions of a penny on the dollar, to realize some return. The new debt owner has legal rights to seek to collect the full amount of the original debt or to resell debts that are uncollected. Some of these debts are sold online, through small internet marketplaces. This marketplace is made up of websites and, in at least one instance, through social media, where written-off bundles, or portfolios, of consumer debt are put up for sale. Typically, these debt portfolios contain the sensitive personal and financial information of consumers. This information can include names, social security numbers, account numbers, and dates of birth. In some instances, unencrypted, identified personal information has been available to any visitor to a debt marketplace website.

    The report is based on a Bureau review of 298 portfolios of debt that surfaced among three online marketplaces the Bureau monitored between January and August 2015. All told, these portfolios were advertised as containing information on more than 1.2 million consumers, with a combined face value of almost $2 billion. The asking price for these debts was only about $18 million, or less than a penny on the dollar on average. Almost half of the accounts offered were payday loan debts and another 25 percent were credit card debts. These online marketplaces list debts that the sellers claim were originated by at least three of the largest credit card lenders.

    Most of the debt for sale in these online marketplaces, along with the attached personal information, cost very little. Of the 214 portfolios that listed both the asking price and the number of accounts for sale, 25 cost less than $1 per consumer account. Another 37 portfolios were priced between $1 and $2. More than half of these debt portfolios were priced less than $5 per consumer account. Some portfolios, including one with a face value of $156 million on sale for $125,000, had asking prices lower than one-tenth of a penny per dollar. Most of the debt sold is at least five years old and 75 percent had been previously pursued by at least two other collectors.

    The Online Debt Sales report is available at: http://files.consumerfinance.gov/f/documents/201701_cfpb_Online-Debt-Sales-Report.pdf 

    More consumers complain to the CFPB about debt collection than any other financial product or service. To date, the CFPB has taken several steps to improve the debt collection marketplace and study the industry. Since 2011, the Bureau has brought more than 25 debt collection cases against first- and third-party collectors. These cases allege violations of the Fair Debt Collection Practices Act, or unfair, deceptive, and abusive collection tactics that violate the Dodd-Frank Wall Street Reform and Consumer Protection Act. These cases have brought a total of $100 million in civil penalties against debt collectors, more than $300 million in restitution to consumers, and $4 billion in debt relief for consumers.

    In October 2012, the CFPB issued a larger participant rule establishing supervisory authority over nonbank debt collectors with more than $10 million in annual receipts from consumer debt collection. This covers about 175 debt collectors that generate more than 60 percent of the industry’s annual receipts. The Bureau has also ordered creditors and debt collectors to stop collecting on debt based on bad information, and to refund hundreds of millions of dollars for unlawful debt collection. The CFPB is continuing to consider proposals to reform the debt collection industry.

    ###

     

    Meyer & Njus

    Wednesday, January 11th, 2017

    Please contact us if Meyer & Njus is attempting to collect money from you.

    FTC Charges Defendants with Selling Fake Payday Loan Debt Portfolios

    Monday, January 9th, 2017

    FTC Charges Defendants with Selling Fake Payday Loan Debt Portfolios

    Debt collectors used them to collect on debts people did not owe

    For Release

    January 9, 2017

    The Federal Trade Commission has charged a Kansas man and his companies with selling portfolios of fake payday loan debts that debt collectors used to get people to pay on debts they did not owe. At the FTC’s request, a federal court halted the operation pending litigation.

    According to the FTC, Joel Jerome Tucker, SQ Capital LLC, JT Holdings Inc. and HPD LLC sold lists of fake loans supposedly made by a phony lender, “Castle Peak,” or by an online loan provider known as “500FastCash.” The listings had the social security and bank account numbers of people who supposedly owed money. Debt buyers and collection agencies subsequently used this information to persuade people that the debts were real and/or to get them to pay the fake debts.

    The FTC alleges that the defendants listed loans the named lenders did not make, and falsely claimed that purported borrowers had failed to repay debts they never owed. It also alleges that the defendants did not have the authority to sell debts of the lenders they named. The complaint alleges that these practices provided the means for deceptive statements, and were unfair, in violation of the FTC Act.

    To add credibility to the fake 500FastCash payday loans, Joel Tucker invoked the name of his brother, racecar driver and payday loan vendor Scott A Tucker. In 2012, the FTC brought an action against Scott Tucker and others engaged in payday lending under various names, including “500FastCash.” In October 2016, a federal court ruled that Scott Tucker must pay $1.3 billion for deceiving and illegally charging consumers undisclosed and inflated fees. In 2015, a co-defendant in that case, 500FastCash trademark owner Red Cedar Services Inc. agreed to pay $2.2 million and cancel consumer loans to settle FTC charges that it illegally charged consumers undisclosed and inflated fees.

    The FTC previously brought actions against two collectors that used Joel Tucker’s fake loan portfolios: Delaware Solutions, whose defendants were banned from the debt collection business in a settlement with the FTC and the New York Attorney General’s office, and Stark Law LLC.

    After this complaint was filed against Joel Tucker and his companies, the court granted the FTC’s request for a preliminary injunction that prohibits the defendants from selling fake debt. The FTC seeks to permanently end the unlawful practice.

    The Commission vote authorizing the staff to file the complaint was 3-0. It was filed in the U.S. District Court for the District of Kansas.

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