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    Phone: 312-739-4200
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    Consumer Financial Protection Bureau orders Discover Bank to pay $18.5 million for illegal student loan servicing practices

    Thursday, July 23rd, 2015

    Consumer Financial Protection Bureau orders Discover Bank to pay $18.5 million for illegal student loan servicing practices

    Posted on July 22, 2015

    Discover’s illegal servicing practices affected private student loan borrowers transferred from Citibank 

    WASHINGTON, DC (July 22, 2015) — Today the Consumer Financial Protection Bureau (CFPB) took action against Discover Bank and its affiliates for illegal private student loan servicing practices. The CFPB found that Discover overstated the minimum amounts due on billing statements and denied consumers information they needed to obtain federal income tax benefits. The company also engaged in illegal debt collection tactics, including calling consumers early in the morning and late at night. The CFPB’s order requires Discover to refund $16 million to consumers, pay a $2.5 million penalty, and improve its billing, student loan interest reporting, and collection practices.

    “Discover created student debt stress for borrowers by inflating their bills and misleading them about important benefits,” said CFPB Director Richard Cordray. “Illegal servicing and debt collection practices add insult to injury for borrowers struggling to pay back their loans. Today’s action is an important step in the Bureau’s work to clean up the student loan servicing market.”

    Discover Bank is an Illinois-based depository institution. Its student loan affiliates – The Student Loan Corporation and Discover Products, Inc. – are also charged in today’s action. Beginning in 2010, Discover expanded its private student loan portfolio by acquiring more than 800,000 accounts from Citibank. As a loan servicer, Discover is responsible for providing basic services to borrowers, including accurate periodic account statements, supplying year-end tax information, and contacting borrowers regarding overdue amounts.

    Student loans make up the nation’s second largest consumer debt market. The market has grown rapidly in the last decade. Today there are more than 40 million federal and private student loan borrowers and collectively these consumers owe more than $1.2 trillion. The market is now facing an increasing number of borrowers who are struggling to stay current on their loans. Earlier this year, the Bureau revealed that more than 8 million borrowers were in default on more than $110 billion in student loans, a problem that may be driven by breakdowns in student loan servicing. While private student loans are a small portion of the overall market, they are generally used by borrowers with high levels of debt who also have federal loans.

    Today’s action demonstrates how Discover failed at providing the most basic functions of adequate student loan servicing for a portion of the loans that were transferred from Citibank. Thousands of consumers encountered problems as soon as their loans became due and Discover gave them account statements that overstated their minimum payment. Discover denied consumers information that they would have needed to obtain tax benefits and called consumers’ mobile phones at inappropriate times to contact them about their debts. The CFPB concluded that the company and its affiliates violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair and deceptive acts and practices, and also the Fair Debt Collection Practices Act. Specifically, the CFPB found that the company: 

    • Overstated the minimum amount due in billing statements: Discover overstated the minimum amount due for certain borrowers who were just starting to pay off their student loan debts. The minimum payment due incorrectly included interest on loans that were still in deferment and were not required to be paid. For some borrowers this overpayment meant diverting payments from other expenses; for others it meant not paying at all because they thought they could not come close to making the full payment and instead accrued associated penalties. 
    • Misrepresented on its website the amount of student loan interest paid: The tax code permits taxpayers to deduct student loan interest paid during the year under certain conditions. Servicers are required to provide borrowers with a statement specifying how much the borrower paid in interest, if it was more than $600. Discover did not provide the Citibank private student loan borrowers with the customary tax information form it provided to its other borrowers, unless those borrowers submitted certain paperwork. For those borrowers who did not submit that additional form, their online interest statements on Discover’s website in 2011 and 2012 reflected $0.00 in interest paid. Discover did not explain that the borrowers were required to fill out a form to get the correct amount of interest they paid. This zero interest statement was likely to mislead consumers into believing that they did not qualify for the student loan tax deduction, potentially causing consumers to not seek important tax benefits.
    • Illegally called consumers early in the morning and late at night, often excessively: Discover placed more than 150,000 calls to student loan borrowers at inappropriate times – before 8 a.m. and after 9 p.m. in the borrower’s time zone. Discover learned about these violations in October 2012 but failed to address the problem until February 2013.
    • Engaged in illegal debt collection tactics: Discover acquired a portfolio of defaulted debt from Citibank but failed to comply with the consumer notices required by federal law. For example, the company failed to provide consumers with specific information about the amount and source of the debt and the consumer’s right to contest the debt’s validity. That information must be provided during the debt collector’s initial communication or in a written notice immediately following that initial communication.

    Enforcement Action

    Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Among the terms of the consent order filed today, Discover must:

    • Return $16 million to more than 100,000 borrowers: Specifically, Discover will:
    • Provide an account credit (or a check if the loans are no longer serviced by Discover) to the consumers who were misled about their minimum payments in an amount equal to the greater of $100 or 10 percent of the overpayment, up to $500. About 5,200 victims will get this credit;
    • Reimburse up to $300 in tax preparation costs for consumers who amend their 2011 or 2012 tax returns to claim student loan interest deductions. For consumers who do not participate in this tax program or did not take advantage of earlier ones offered by the company, Discover will issue an account credit of $75 (or a check if their loans are no longer serviced by Discover) for each relevant tax year. About 130,000 victims will receive this relief; and
    • Provide account credits of $92 to consumers subjected to more than five but fewer than 25 out-of-time collection calls and account credits of $142 to consumers subjected to more than 25 calls. About 5,000 victims will receive these credits.
    • Accurately represent the minimum periodic payment: Discover cannot misrepresent to consumers the minimum periodic payment owed, the amount of interest paid, or any other factual material concerning the servicing of their loans.
    • Send clear and accurate student loan interest and tax information to borrowers: Discover must send borrowers the IRS W-9S form that it requires them to complete to receive a form 1098 from the company, and it must clearly explain its W-9S requirement to borrowers. Discover must also accurately state the amount of student loan interest borrowers paid during the year.
    • Cease making calls to consumers before 8 a.m. or after 9 p.m.: Discover must contact overdue borrowers at reasonable times. This will be determined by the time zone of the consumer’s known residence or phone number, unless the consumer has expressly authorized Discover to call outside these hours.
    • Pay $2.5 million civil penalty: Discover will pay $2.5 million to the CFPB’s Civil Penalty Fund.

    Big Win for CFPB on Debt Collection

    Thursday, July 16th, 2015


    Posted: 16 Jul 2015 03:10 AM PDT


    from Credit Slips

    Yesterday, Judge Amy Totenberg of the Northern District of Georgia issued a very cogent 70-page opinion in the case of the CFPB v. Frederick Hanna & Associates, a large collection law firm with offices in Georgia, Florida, and South Carolina. The opinion denies Hanna’s motion to dismiss in its entirety, and almost completely agrees with the CFPB’s legal theory. In doing so, the opinion deals a serious blow to the collection law firm business model.

    A brief recap of the case:   A year ago, the CFPB filed suit against the Hanna law firm essentially attacking the big collection law firm business model. Among other things, the CFPB alleged that the firm operated “less like a law firm than a factory” and that attorneys were not “meaningfully involved” in the collection lawsuits they filed. As an example, the CFPB alleged that one attorney in the Hanna firm signed about 138,000 lawsuits between 2009-10. That’s 189 lawsuits per day, 7 days a week, 52 weeks a year.

    The second CFPB claim was that in filing most of its lawsuits on behalf of debt buyers, the law firm “knew or should have known that many of the[] affidavits [they filed] were executed by persons who lacked personal knowledge of the facts.” The Bureau sued under both the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA) for what it alleges were false or misleading and unfair acts and practices.

    The opinion allows the Bureau to proceed on all of these claims. Specifically, Judge Totenberg found that the Bureau could regulate collection attorneys under the CFPA (the first time any court considered this issue), that the “meaningful involvement doctrine” extends to activities in litigation, and that the Hanna firm might be liable for filing affidavits given to it by its clients if the CFPB can prove its allegations.

    The last two points are huge because it means that collection attorneys will have to spend some time reviewing the collection cases they file. (How much time and what constitutes enough “involvement” is up in the air). Nonetheless, this completely up-ends the business model of at least some collection law firms. As Joann Needleman has pointed out at InsideARM, an interlocutory appeal is unlikely to succeed here, so look for the CFPB to file more cases (or enter into consent decrees) with more law firms.

    FCC Releases Order Clarifying TCPA

    Tuesday, July 14th, 2015

    Last Friday, July 10, 2015, the Federal Communications Commission (FCC) released Declaratory Ruling and Order 15-72 (“Order 15-72”) to address more than 20 requests for clarity on FCC interpretations of the Telephone Consumer Protection Act (TCPA). The release of Order 15-72 follows a June 18th open meeting at which the FCC adopted the rulings now reflected in Order 15-72 that are intended to “close loopholes and strengthen consumer protections already on the books.”

    Keys rulings in Order 15-72 include:

    • Confirming that text messages are “calls” subject to the TCPA;

    • Clarifying that consumers may revoke their consent to receive robocalls (i.e., telemarketing calls or text messages from an automated system or with a prerecorded or artificial voice) “at any time and through any reasonable means”;

    • Making telemarketers liable for robocalls made to reassigned wireless telephone numbers without consent from the current account holder, subject to “a limited,one-call exception for cases in which the caller does not have actual or constructive knowledge of the reassignment”;

    • Requiring consent for internet-to-phone text messages;

    • Clarifying that “nothing … prohibits” implementation of technology that helps consumers block unwanted robocalls;

    • Allowing certain parties an 89-day (after July 10, 2015) window to update consumer consent to “prior express written consent” as the result of an ambiguous provision in the 2012 FCC Order that established the “prior express written consent” requirement; and

    • Exempting from the consent requirement certain free “pro-consumer financial- and healthcare-related messages”.

    FCC Releases Long-Awaited TCPA Ruling And Order

    Saturday, July 11th, 2015

    On the cusp of rush hour Friday evening, the Federal Communications Commission finally released its long-awaited (since June 18) TCPA Omnibus Declaratory Ruling and Order. . . . . We will report further in the coming days as we digest the details.

    Per the language of the ruling itself: “To reiterate and simplify the relevant portions of the TCPA, and as a guide to the issues we address below: if a caller uses an autodialer or prerecorded message to make a non-emergency call to a wireless phone, the caller must have obtained the consumer’s prior express consent or face liability for violating the TCPA. Prior express consent for these calls must be in writing if the message is telemarketing, but can be either oral or written if the call is informational.”

    Other highlights:


    • The ruling reaffirms the Commissions previous statements, and, while restrictive, isn’t necessarily surprising: “Dialing equipment generally has the capacity to store or produce, and dial random or sequential numbers (and thus meets the TCPA’s definition of ‘autodialer’) even if it is not presently used for that purpose.”
    • Predictive dialers also satisfy the TCPA’s definition of ‘autodialer.’
    • Per the FCC: “Congress intended a broad definition of autodialer.”

    Establishing/Revoking Consent

    • Consent can be rescinded by the called/consumer at any time, and via any reasonable means. (However, guess who forgot to define “reasonable”?) In fact, “ A caller may not limit the manner in which revocation may occur.” (In this document, “caller” can be read as “debt collector” for the most part.)
    • On the bright side: “The Commission recently held that the TCPA does not prohibit a caller from obtaining a consumer’s prior express consent through an intermediary.”
    • “Petitioner Edwards asks the Commission to clarify whether a creditor may make autodialed or prerecorded message calls to a wireless number initially provided to the creditor as associated with wireline service.  Edwards asserts that, where a consumer initially provides a wireline number to a creditor and thereby grants consent to be called at that number regarding the debt, but later ports the wireline number to wireless service, the consent to be called regarding the debt does not apply to the wireless number.”
    • “Porting a telephone number from wireline service to wireless service does not revoke prior express consent.” Interestingly, the Commissioners went on to say, “if the consumer who gave consent to be called and later ported his wireline number to wireless no longer wishes to be called because he may incur charges on his wireless number, it is the consumer’s prerogative and responsibility to revoke the consent.”
    • “We clarify that the TCPA requires the consent not of the intended recipient of a call, but of the current subscriber.”

    Also on Friday, ACA International [debt collectors trade association] filed a lawsuit against the FCC, citing that the ruling is at odds with the original intent of the law, seeking judicial review of the June 18 order. The FCC had specifically and explicitly declined to grant a petition of rulemaking to the trade association

    OCC Fines JPMorgan Chase $30 Million for Deficiencies in Debt Collection Practices and Servicemembers Civil Relief Act Compliance

    Wednesday, July 8th, 2015

    OCC Fines JPMorgan Chase $30 Million for Deficiencies in Debt Collection Practices and Servicemembers Civil Relief Act Compliance

    WASHINGTON — The Office of the Comptroller of the Currency (OCC) today assessed a $30 million civil money penalty against JPMorgan Chase Bank, N.A.; JPMorgan Bank and Trust Company, N.A.; and Chase Bank USA, N.A. for unsafe or unsound practices related to the non-home loan debt collection litigation practices and to the Servicemembers Civil Relief Act (SCRA) compliance practices.

    The unsafe or unsound practices involved deficiencies in the bank’s practices and procedures related to the preparation and notarization of affidavits and other sworn documents used in the bank’s debt collection litigation and deficiencies in its SCRA compliance program.

    The penalty, paid to the U.S. Treasury, follows the enforcement action issued by the OCC on September 18, 2013. That order required the bank to provide remediation to affected consumers and to correct deficiencies in the bank’s practices and procedures.

    As of June 2015, consumers have received more than $50 million as a result of the OCC’s 2013 orders. Bank management continues to identify impacted consumers and servicemembers as required under the OCC Consent Order, and will pay additional restitution to affected consumers as necessary.

    OCC national bank examiners continue to monitor the bank’s compliance with the order.

    The Consumer Financial Protection Bureau (CFPB) along with 47 states and the District of Columbia, are taking separate actions, which were also announced today.

    Statement of Thomas J. Curry Comptroller of the Currency On Civil Money Penalties Assessed Against JPMorgan Chase Bank July 8, 2015 The civil money penalty we are assessing today follows an enforcement action that we took against JPMorgan Chase Bank N.A. and two of its affiliates in 2013. That action focused on non-mortgage debt collection practices and Servicemember Civil Relief Act compliance. At that time, we required corrective action to address the deficiencies plus restitution for customers harmed by improper practices. To date, more than $50 million in restitution has been paid by the bank to affected customers. Compliance with the Servicemembers Civil Relief Act, or SCRA, is a matter of great concern to me and to the OCC. The men and women who serve in the uniformed military not only put themselves at risk, but they give up the comforts of home and family, and they sacrifice financially. Congress took note of their financial sacrifice in passing the SCRA, and we recognized it in changes we made to our examination procedures in 2013. At that time, we mandated that SCRA compliance be evaluated as part of every exam at every institution we supervise. Each of those examinations must include a review of the process the bank uses to comply with rate reduction requests from individuals who go on active duty, as well as an evaluation of the bank’s foreclosure practices with respect to servicemembers. Although these steps are not required by law, we felt they were necessary to ensure that the men and women who serve our country receive the legal protections they are entitled to. With respect to debt collection, it was dismaying to find that documents being used in litigation were being rushed through in a process that has come to be known as “robosigning.” Our action in 2013 was aimed at ensuring that affidavits and other sworn documents are accurate, based on the knowledge of the person signing the document, and properly notarized. Today, after having taken time to assess the full extent of the deficiencies, we are joining with the CFPB and the states in assessing monetary penalties. These come on top of the restitution required by our previous order, and they will help ensure that banks treat all customers, including member of the armed services, fairly

    CFPB, 47 States and D.C. Take Action Against JPMorgan Chase for Selling Bad Credit Card Debt and Robo-Signing Court Documents

    Wednesday, July 8th, 2015

    CFPB, 47 States and D.C. Take Action Against JPMorgan Chase for Selling Bad Credit Card Debt and Robo-Signing Court Documents

    Chase Ordered to Overhaul Debt Sales and Halt Collections on 528,000 Consumers’ Accounts

    WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau and Attorneys General in 47 states and the District of Columbia took action against JPMorgan Chase for selling bad credit card debt and illegally robo-signing court documents. The CFPB and states found that Chase sold “zombie debts” to third-party debt buyers, which include accounts that were inaccurate, settled, discharged in bankruptcy, not owed, or otherwise not collectible. The order requires Chase to document and confirm debts before selling them to debt buyers or filing collections lawsuits. Chase must also prohibit debt buyers from reselling debt and is barred from selling certain debts. Chase is ordered to permanently stop all attempts to collect, enforce in court, or sell more than 528,000 consumers’ accounts. Chase will pay at least $50 million in consumer refunds, $136 million in penalties and payments to the CFPB and states, and a $30 million penalty to the Office of the Comptroller of the Currency (OCC) in a related action.

    “Chase sold bad credit card debt and robo-signed documents in violation of law,” said CFPB Director Richard Cordray. “Today we are ordering Chase to permanently halt collections on more than 528,000 accounts and overhaul its debt-sales practices. We will continue to be vigilant in taking action against deceptive debt sales and collections practices that exploit consumers.”

    Chase Bank, USA N.A. and its subsidiary Chase BankCard Services, Inc. are based in Newark, Del. and provide consumers with credit card accounts. From 2009 to 2013, when consumers defaulted on debts, Chase attempted to collect by contacting consumers, filing collections lawsuits, and selling accounts to third-party debt buyers. When Chase sold accounts, it provided debt buyers with an electronic sale file containing certain basic information about the debts from Chase’s internal databases, which the debt buyers used to collect on the debts. Chase was also responsible for preparing affidavits to verify debts when it or its debt buyers filed lawsuits to collect on defaulted credit card debts.

    The CFPB found that Chase violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, or abusive acts and practices. Chase sold faulty and false debts to third-party collectors, including accounts with unlawfully obtained judgments, inaccurate balances, and paid-off balances. Chase also sold debts that were owed by deceased borrowers. Chase also filed misleading debt-collections lawsuits against consumers using robo-signed and illegally sworn statements to obtain false or inaccurate judgments for unverified debts. Specifically, the CFPB and states found that Chase:

    • Sold bad debts to third-party debt buyers: Chase sold certain accounts that had already been settled by agreement, paid in full, discharged in bankruptcy, identified as fraudulent and not owed by the debtor, subject to an agreed-upon payment plan, no longer owned by Chase, or that were otherwise no longer enforceable. Chase also sold debts with missing or erroneous information such as whether the debt had been paid and the amount owed.
    • Assisted third-party debt buyers in deceptively collecting debt: By selling inaccurate or uncollectable debts, Chase subjected certain consumers to debt collection by its debt buyers on accounts that were not theirs, in amounts that were incorrect or uncollectable. Chase knew, or should have known, that third-party debt buyers would seek to collect these faulty debts. Therefore, by providing inadequate or incorrect information, Chase assisted debt buyers in deceptive collection activities.
    • Robo-signed affidavits to sue consumers for unverified debt: Chase filed more than 528,000 debt collections lawsuits against consumers and provided more than 150,000 sworn statements to debt buyers for their collections lawsuits against consumers, often using robo-signed documents. In doing so, Chase systematically failed to prepare, review, and execute truthful statements as required by law. Chase also made calculation errors when filing debt collection lawsuits that sometimes resulted in judgments against consumers for incorrect amounts. Chase failed to notify consumers and the courts once it learned of these problems.

    Enforcement Action

    Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or that otherwise violate federal consumer financial laws. Chase suspended collections litigation in 2011 and stopped selling debts in 2013. The CFPB and state actions provide relief for injured consumers, prohibit Chase from reviving its unlawful practices, and impose penalties for Chase’s law violations. Specifically, the order requires Chase to:

    • Cease collecting on 528,000 accounts: Chase cannot collect, enforce in court, sell, or transfer debts for consumers whose Chase credit card accounts were sent to collections litigation between January 1, 2009 to June 30, 2014. If Chase previously obtained a court judgment requiring consumers to pay the debt, Chase will notify the consumer that they will not try to collect, enforce, or sell the judgment. Chase will also contact the three major credit reporting companies to request that the judgments not be reported against consumers. These accounts had an original face value estimated at several billion dollars when Chase sent them to collections litigation. The actual market value is now estimated in the tens or hundreds of millions of dollars. Debt relief of this kind permanently protects consumers from any further collections and judgments on these accounts.
    • Pay at least $50 million in cash redress to consumers: Chase will pay cash refunds to consumers against whom collections litigation was pending between January 1, 2009 and June 30, 2014, for amounts paid above what the consumer owed when the debt was referred for litigation, plus 25 percent of the excess amount paid.
    • Prohibit debt buyers from reselling accounts: Chase must require by contract or agreement that debt buyers cannot resell debts purchased from Chase, unless to sell back to Chase.
    • Confirm debt before selling to debt buyers: Chase cannot sell debts that have been paid, settled, discharged, or are otherwise uncollectable. Prior to sale, Chase must provide account-level documentation to debt buyers confirming that the debts are accurate and enforceable. For a minimum of three years after selling the debt, Chase must make certain additional account information available to debt buyers including agreements, statements, and dispute records.
    • Notify consumers that their debt has been sold and make their account information available to them: Chase must notify consumers when their account is sold and reveal who purchased the account, the amount owed at the time of sale, and that consumers can request further information about their accounts at no charge.
    • Not sell zombie debts and other specified debts: Chase may not sell debts that do not have the required documentation, have been charged off for over three years or where the consumer has not paid for three years, are in litigation, are owed by a servicemember, are owed by someone who is deceased, or where the debtor has a payment plan.
    • Withdraw, dismiss, or terminate collections litigation: Chase will withdraw, dismiss, or terminate all pre-judgment collections litigation pending at any time after January 1, 2009.
    • Stop robo-signing affidavits: Declarations must be signed by hand, must reflect the actual date of signing, and must be based on the direct knowledge of the person signing and their review of Chase’s business records. Supporting documents submitted for debt collection litigation must be actual records of the debt, verified to be accurate, and not created solely for litigation.
    • Verify debts when filing a lawsuit: When filing collections lawsuits, Chase is required to submit specific information associated with the debt including the name of the creditor at the time of the last payment, the date of the last extension of credit, the date of the last payment, the amount of debt owed, and a breakdown of any post-charge-off interest and fees.
    • Pay $30 million civil penalty: Chase will pay a fine for its unlawful debt sales and robo-signing practices.

    Chase must also implement policies, procedures, systems, and controls to ensure compliance with federal consumer financial laws when selling and collecting debts.

    The Bureau is joined by 47 states and the District of Columbia in today’s action. The Bureau also worked in coordination with the OCC, which entered into a related agreement with Chase in 2013. The total relief to consumers includes debt relief associated with halting collections on more than 528,000 consumers’ accounts and at least $50 million in refunds. The amount of penalties and payments to states includes a $30 million civil penalty paid to the CFPB, a $30 million civil penalty paid to the OCC on the related matter, and $106 million in payments to states.

    Supplement Marketers Will Relinquish $1.4 Million to Settle FTC Deceptive Advertising Charges

    Wednesday, July 8th, 2015

    Ads Claimed Procera AVH Would Restore 10 to 15 Years of Memory Loss

    The marketers of a dietary supplement called Procera AVH will relinquish $1.4 million under settlements resolving Federal Trade Commission charges that they deceived consumers with claims that the supplement was clinically proven to significantly improve memory, mood, and other cognitive functions.

    Under the terms of the settlements, the defendants will pay $1 million to the FTC, and another $400,000 to satisfy a judgment in a case brought by local California law enforcement officials. They also will be barred from making similar deceptive claims in the future and from misrepresenting the existence, results, or conclusions of any scientific study.

    “The defendants in this case couldn’t back up their claims that Procera AVH would reverse age-related mental decline and memory loss,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Be skeptical of ads promising quick and easy cures.”

    According to the FTC’s complaint, the defendants marketed and sold Procera AVH as a “solution” to memory loss and cognitive decline, including as associated with aging. The defendants advertised the product using infomercials, direct mail flyers, newspapers, and the Internet.

    In one newspaper ad for the product the headline stated: “Memory Pill Helps the Brain Like Prescription Glasses Help the Eyes … Remarkable changes observed, helps users match the memory power of others 15 years younger in as little as 30 days!”

    The cover of a multi-page direct mail ad was called a “Special Edition” of the “Physician’s Mind and Memory Alert.” Inside the text stated: “The thought of being a prisoner in one’s own home, or being unable to recall who you are, where you live, or to whom you are related is sending forgetful baby boomers and retirees scrambling for a solution.” The ad then promoted Procera AVH as “the memory pill preferred by many doctors.”

    Procera AVH typically cost $79 per bottle, or $119 for three bottles for consumers who signed up for the continuity purchase plan and agreed to get automatic refills.

    The complaint names KeyView Labs LLC, Brain Research Labs, LLC, George Reynolds (a/k/a Josh Reynolds), John Arnold, and three related companies.

    The Commission’s complaint alleges that efficacy claims for Procera AVH were false, misleading, or unsubstantiated and that the defendants falsely claimed that a scientific study proved the products efficacy. The complaint also charges Reynolds, the founder and chief science officer of Brain Research Labs, with making deceptive expert endorsements for Procera AVH.

    The two proposed settlement orders against the defendants impose a $61 million judgment against KeyView and a $91 million judgment against the remaining defendants.

    The judgments direct the defendants to pay $1 million to the FTC, and an additional $400,000 to satisfy a judgment obtained by local law enforcement in Santa Cruz, California against Brain Research Labs and Reynolds. If the $400,000 is not paid to satisfy the Santa Cruz judgment, it is immediately due to the Commission. Once the $1.4 million is paid, the judgments will be suspended.

    The Commission votes approving the complaint and two proposed stipulated final orders were each 5-0. The orders are subject to court approval. The FTC filed the complaint and proposed orders in the U.S. District Court for the Central District of California.

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


    National Collegiate Student Loan Trust Cases

    Thursday, July 2nd, 2015

    Please contact us if one of the National Collegiate Student Loan Trusts is trying to collect a loan from you in Illinois.

    NCT files about 125 lawsuits per month in Cook County alone, and more in other counties.

    Do not allow NCT to get a judgment against you by failing to respond to a summons and complaint.  NCT has obtained hundreds of judgments against people who did not bother to defend themselves.  If you fail to respond, they can get a default judgment against you and then garnish your non-exempt wages, seize your non-exempt assets and put liens on your property.

    Also, do not agree to a judgment with an agreement that you will pay a small sum per month for six months or so.  NCT tries to get people to agree to this.  If  you do this you have waived your right to dispute the debt and at the end of that period the judgment  can be enforced against your nonexempt assets and up to 15% of your wages.   Judgments are enforceable for 20-27 years in Illinois, and bear interest at 9%.  Some of these agreements don’t even pay the interest on the judgment.  Any agreement should completely resolve the debt, with a substantial discount.

    Don’t make the mistake of calling NCT or its attorneys or debt collectors before speaking to an attorney.

    NCT cases often have problems with them for a wide variety of reasons  NCT   sometimes cannot prove that it has the right to collect on the student loan debt at issue. Sometimes it cannot prove  the amount due.  Some suits appear to be filed beyond the statute of limitations.  NCT loans are actually serviced by NCO Financial/ Transworld, an organization which has a long history of consent orders and government investigations; this casts doubt on the accuracy of any records it produces.

    We have lots of experience defending NCT cases, and have also brought a number of affirmative claims challenging NCT’s  collection practices.  If you are currently being sued by NCT, or anticipate a lawsuit in the near future please call us immediately.

    Consumers often sign away option to sue financial companies

    Monday, June 29th, 2015

    Story from The Columbus (Ohio) Dispatch

    Sunday June 28, 2015 6:23 AM
    It’s typically so buried in the fine print that most consumers don’t even know it’s there when they sign up for a credit card, checking account or some other financial product.

    The surprise is this: Consumers often are giving up their right to go to court if they have a dispute with a company; they are agreeing instead to take any disagreement to arbitration.

    As it turns out, these deals hurt consumers because it limits their ability to recover damages in class-action lawsuits, according to a report issued earlier this year by the federal Consumer Financial Protection Bureau.

    “Tens of millions of consumers are covered by arbitration clauses, but few know about them or understand their impact,” said Richard Cordray, the bureau’s director and a former Ohio attorney general.

    Cordray said the study put the cost to consumers in the millions of dollars each year.

    Arbitration calls for disputes to be settled with the help of a neutral third party.

    The bureau’s report, ordered by Congress, noted that many contracts for consumer financial products and services block lawsuits, including class-action cases, from proceeding in court. Such requirements have been upheld by the U.S. Supreme Court.

    Among the cases cited by the report were complaints from customers that banks were posting transactions to checking accounts in the order of the largest dollar amount to the smallest. That caused the customers to pay millions of dollars more in overdraft fees than they would have if the transaction had been posted in a more neutral order.

    Class-action lawsuits against several banks covering 29 million consumers led to settlements totaling $1 billion, and many banks changed the way they processed overdrafts.

    Other banks, meanwhile, were able to invoke the arbitration clauses in their checking accounts to get class-action cases dismissed.

    In another case, consumers filed class-action lawsuits against credit-card companies over allegations that they were wrongfully charged foreign-transaction fees on purchases.

    Businesses say using alternative methods for handling disputes, such as arbitration, saves money and resolves disputes faster than lawsuits do.

    “Banks’ robust dispute-resolution procedures ensure that the overwhelming majority of disputes are resolved long before they get to arbitration,” said Nessa Feddis, senior vice president and deputy chief counsel for consumer protection and payments for the American Bankers Association. “ When needed, arbitration is an efficient, fair and low-cost method of resolving disputes in a fraction of the time — and at a fraction of the cost — of expensive litigation, which helps keep costs down for all consumers.”

    How consumers can handle disputes with their credit-card company is usually something that’s not on their mind when they shop for a new card.

    Usually, they are more interested in interest rates or rewards programs, said Matt Schulz, a senior industry analyst with

    “It’s the furthest thing from their mind — what they are signing away in case something goes wrong with the card,” he said.

    Still, the issue of forced arbitration does not generate many complaints, he said.

    “It’s definitely something if you get into a dispute and you realized that you had signed this, you’d be pretty upset, and understandably so. You’re hands are tied in a lot of ways,” Schulz said.

    Class-action lawsuits often start when a consumer notices, for example, an illegitimate fee that has been added to a credit-card bill, said Sarah Cole, a law professor at Ohio State University.

    “Lots of people don’t know about the fee, and they are losing a lot of money,” she said.

    Often, the only way for consumers to challenge these fees is to come together as a group and sue, she said.

    “In their study, class-action waivers are causing consumers not to bring claims at all,” Cole said. “It is basically a litigation-prevention mechanism.”

    Cole said she likes arbitration and thinks it is a good way to resolve disputes, but it shouldn’t be imposed on consumers.

    The report examined six kinds of financial products — checking accounts, credit cards, prepaid cards, payday loans, private student loans and wireless products — covering tens of millions of consumers.

    Credit-card companies representing more than half of all credit-card debt and affecting as many as 80 million consumers have arbitration clauses, the report found. For checking accounts, banks representing 44 percent of insured deposits have those clauses.

    The report said 75 percent of consumers surveyed didn’t know whether there was an arbitration clause in their agreements with financial-service companies, and 7 percent didn’t know that those clauses restricted their ability to sue in court.

    The report found that across the six kinds of products, an average of about 600 arbitration cases and 1,200 federal lawsuits were filed each year.

    By comparison, about 32 million consumers a year are eligible to participate in class-action cases. Class-action cases during the five years the study looked at led to settlements totaling $2.7 billion.

    Those figures don’t account for the potential value of companies that change their behavior because of the lawsuits.

    Finally, the report noted that there was no evidence that using arbitration to handle disputes leads to lower prices for consumers, one of the arguments made by proponents in favor of arbitration.’s Schulz said the solution for consumers who don’t want to be forced into arbitration is to search for companies that don’t demand that. It is just another reason consumers need to do homework before picking a card or checking account, he said.

    Already, some big credit-card companies such as JPMorgan Chase & Co., Capital One and Bank of America have eliminated arbitration requirements from most of their cards. Other companies are allowing new customers to opt out.

    “It’s such a competitive marketplace,” Schulz said. “Now is even a better time to ask for these things. Consumers are spending more, and more bankers are lending more money to more people.”


    Tuesday, June 23rd, 2015


    Company Mishandled Consumer Credit Reporting Disputes, Prevented Consumers From Exercising Debt Collection Rights 

    WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against a medical debt collection company for mishandling consumer credit reporting disputes and preventing consumers from exercising important debt collection rights. These practices potentially affected the credit scores of thousands of individuals and caused consumers distress and confusion. The CFPB is ordering the company to provide over $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty.

    “Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said CFPB Director Richard Cordray. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze. Today we are putting a stop to these illegal practices and getting consumers the relief they deserve.”

    Syndicated Office Systems, LLC, which does business as Central Financial Control, is a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers. The company is an indirect subsidiary of Conifer Health Solutions, LLC, which provides billing and other services to more than 600 hospitals nationwide. Tenet Healthcare Corporation, a publicly traded healthcare services company based in Dallas, Texas, is the parent company of Conifer Health Solutions.

    Companies that collect medical debt and supply this information to credit reporting agencies have a significant impact on consumers’ credit scores. More than 43 million Americans have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt. A recent CFPB report found that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers. The Bureau also found that medical debt can overly penalize consumer credit scores.

    As part of its debt collection business, Syndicated Office Systems regularly supplies information on the status of its medical debt collection accounts to credit reporting agencies and is considered a furnisher under the Fair Credit Reporting Act. Credit reporting agencies track a consumer’s credit history and other consumer transactions based on information supplied by furnishers. The reports that credit reporting agencies sell are used in determining everything from consumer eligibility for credit to employment decisions.  

    Syndicated Office Systems typically initiates collection efforts through letters and telephone calls to consumers. Within five days of their initial communication, debt collectors are generally required to send debt validation notices to alert consumers about their right to request proof that a debt is valid or dispute the debt. A CFPB investigation, however, uncovered that Syndicated Office Systems failed to send debt validation notices to thousands of consumers.

    The CFPB also found that the company mishandled consumer credit reporting disputes by failing to investigate and respond to consumers within the 30-day timeframe required under the law.  Because the company furnishes information related to past-due medical debt, the information consumers seek to dispute or validate has the potential to lower credit scores.

    The CFPB order charges the company with violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The violations specifically include:

    • Mishandling consumer credit reporting disputes:  Syndicated Office Systems failed to respond to more than 13,000 consumer credit report disputes within the 30-day timeframe required by law. On average, the company took more than 90 days to respond to consumers’ disputes and, in some cases, took over a year. Consumers spent time and money attempting to follow up on unresolved disputes and experienced distress and confusion due to the delays. The CFPB found that the company had no policies or procedures in place to investigate these consumer credit report disputes. Instead, the company treated consumer credit report disputes in the same way as other consumer complaints and had no deadline for responding.
    • Preventing consumers from exercising important debt collection rights:  Syndicated Office Systems failed to send debt validation notices to more than 10,000 consumers. During this time, the company continued to collect over $2 million from consumers who did not receive the notices. Failing to provide notices denies consumers the opportunity to assess whether the debt is valid and whether the amount or source is correct. These notices can be an especially important consumer safeguard with regard to medical debt, where issues like insurance reimbursements and medical billing processes are commonly fraught with complexity, confusion, and delay, and can lead to consumers being unsure of how much to pay or even whom to pay. 

    Together, these violations had the potential to harm thousands of consumers and in some cases, negatively impact their credit scores. This can hinder consumers’ ability to obtain credit or increase the rates they may pay for credit. In some cases, the company reported inaccurate information to the credit reporting agencies and then failed to provide a timely response to consumer disputes about the errors. Some consumers may also have been able to avoid negative information on their credit reports if they had known about their right to assess and dispute the debt in question. 

    Enforcement Action
    To address these violations, the CFPB order requires Syndicated Office Systems to take the following actions: 

    • Provide over $5 million in relief to harmed consumers: Syndicated Office Systems must identify all affected consumers and provide monetary relief. Consumers who were never sent a debt validation notice and who made payments to the company will receive a full refund and have remaining account balances forgiven. The company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company. The company must also pay damages ranging from $100-$1,000 to each consumer who did not receive a timely response to his or her credit report dispute. The amount that each consumer receives will correspond to the duration of the company’s delay in responding to the consumer’s credit report dispute. The company must submit a written plan to the CFPB for approval detailing how the company will identify affected consumers and provide relief.
    • Correct errors on credit reports: Syndicated Office Systems must identify all consumer accounts affected by its illegal business practices and fix any inaccuracies. The company must also update the account information it has furnished to the credit reporting companies and notify all affected consumers of this update, to the extent it has not already done so.
    • End illegal credit reporting and debt collection practices: The company must cease its illegal business practices and develop new policies to comply with federal consumer credit reporting and debt collection laws.
    • Establish consumer safeguards: Syndicated Office Systems must change how it does business and establish safeguards to ensure it has the staffing, facilities, systems, and information necessary to timely and completely respond to consumer credit report disputes. It must also establish a strong oversight program to identify any systemic inaccuracies to ensure that it informs consumers of their right to validate and dispute inaccurate debts in collection.
    • Pay a civil monetary penalty of $500,000: Syndicated Office Systems will pay a $500,000 fine for the illegal actions.

    The consent order filed today is available here:

    The CFPB will continue to enforce federal laws to ensure accuracy in credit reporting and debt collection. Consumers should check their credit report for inaccuracies at least once a year. Consumers can order a free credit report once every 12 months from

    Tips for consumers on how to deal with medical debt can be found at: