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    Edelman, Combs, Latturner, & Goodwin, LLC

    20 South Clark Street
    Suite 1500
    Chicago, IL 60603
    Phone: 312-739-4200
    Fax: 312-419-0379

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    FTC Amends Telemarketing Rule to Ban Payment Methods Used by Scammers

    Wednesday, November 18th, 2015

    Following a public comment period, the Federal Trade Commission has approved final amendments to its Telemarketing Sales Rule (TSR), including a change that will help protect consumers from fraud by prohibiting four discrete types of payment methods favored by con artists and scammers.

    “Con artists like payments that are tough to trace and hard for people to reverse,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “The FTC’s new telemarketing rules ban payment methods that scammers like, but honest telemarketers don’t use.”

    The TSR changes will stop telemarketers from dipping directly into consumer bank accounts by using certain kinds of checks and “payment orders” that have been “remotely created” by the telemarketer or seller. These two payment mechanisms make it easy for unscrupulous telemarketers to debit bank accounts without consumers’ permission, and can make it difficult to reverse the transactions with consumers’ banks.

    In addition, the amendments will bar telemarketers from receiving payments through traditional “cash-to-cash” money transfers – provided by companies like MoneyGram, Western Union, and RIA. Scammers rely on cash transfers as a quick, anonymous, and irretrievable method to extract money from consumer victims – once it is picked up by the recipient, the money is gone.

    The TSR changes also will prohibit telemarketers from accepting as payment “cash reload” mechanisms – such as MoneyPak, Vanilla Reload, or Reloadit packs used to add funds to existing prepaid cards. Scammers use the cash reload mechanism to apply the funds to their own prepaid debit cards and disappear with the money. In 2015, major cash reload providers replaced cash reload mechanisms with a swipe reload process, a safer alternative not affected by the TSR amendments.

    As detailed in the Federal Register notice announcing the Final Rule, the amendments address changes in the financial marketplace to ensure consumers remain protected by the TSR’s antifraud provisions, but are narrowly tailored to allow for innovations with respect to other payment methods that are used by legitimate companies. According to the statement of basis and purposeaccompanying the notice, the final rule also will:

    • Expand the advance-fee ban on recovery services to include losses both in prior telemarketing and non-telemarketing transactions; and
    • Require that a description of the goods or services purchased must be included in the tape recording of a consumer’s express verifiable authorization to be charged.

    In addition, the TSR amendments update several provisions related to the National Do Not Call (DNC) Registry to, among other things:

    • Expressly state that a seller or telemarketer has to demonstrate that it has an existing business relationship with, or has received an express written agreement from, a consumer it calls if the consumer’s number is on the DNC Registry;
    • Illustrate the types of burdens that deny or interfere with a consumer’s right to be placed on a seller’s or telemarketer’s entity-specific do-not-call list;
    • Specify that if a seller or telemarketer does not get the information needed to place a consumer’s number on its entity-specific do-not-call list, the seller or telemarketer is disqualified from the safe harbor for isolated or accidental violations; and
    • Emphasize that sellers are prohibited from sharing the cost of the fees to access the DNC Registry

    The Commission vote approving publication of the notice in the Federal Register was 3-1, with Commissioner Maureen Ohlhausen voting no.

    Chairwoman Edith Ramirez and Commissioners Julie Brill and Terrell McSweeny issued a Commission statement, which also was approved by a 3-1 vote, with Commissioner Ohlhausen voting no and issuing a separate statement, dissenting in part.

    Most provisions of the final rule will become effective 60 days after publication.

    Western Sky

    Sunday, November 8th, 2015

    Please contact us if you are in Illinois and obtained a loan from Western Sky

    Violations on FHA, Fannie Mae Mortgages

    Thursday, November 5th, 2015

    Please contact us if a foreclosure suit has been filed against you on an FHA insured mortgage or a Fannie Mae owned mortgage in Illinois, or you have received demand letters on such a mortgage.  You may be entitled to recover damages.

    IPass and EZ Pass collection issues

    Wednesday, November 4th, 2015

    A recent Virginia federal court decision holds that collection of EZPass toll road accounts (IPass in Illinois) are subject to the Fair Debt Collection Practices Act, at least if you have a contract and transponder and are not just driving on a toll road and don’t pay.  Please contact us if you have collection issues on such an account.


    Thursday, October 29th, 2015

    October 29, 2015

    Office of Communications
    Tel: (202) 435-7170

    General Information Services and Affiliate Failed to Verify the Accuracy of Consumer Reports Sold to Employers about Job Applicants

    WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) took action against two of the largest employment background screening report providers for failing take basic steps to assure the information reported about job applicants was accurate. The serious inaccuracies reported by General Information Services and its affiliate,, Inc. (BGC), potentially affected consumers’ eligibility for employment and caused reputational harm. The CFPB is ordering the companies to correct their practices, provide $10.5 million in relief to harmed consumers, and pay a $2.5 million civil penalty.

    “General Information Services and its affiliate failed to take basic steps to provide accurate background screening reports to employers about job applicants,” said CFPB Director Richard Cordray. “Today, we are holding two of the largest companies in this market accountable for cleaning up the quality of their reports.”

    GIS and its affiliate, BGC, collectively generate and sell more than 10 million consumer reports about job applicants each year to prospective employers. These consumer reports include criminal history information and civil records, among other types of data. Employers use the consumer reports to determine hiring eligibility of applicants and make other types of employment decisions. The companies are two of the largest background screening report providers in the United States. GIS is headquartered in Chapin, S.C., and BGC is headquartered in Dallas, Texas.

    The CFPB found that GIS and BGC violated the Fair Credit Reporting Act by, among other things, failing to employ reasonable procedures to assure the maximum possible accuracy of the information contained in reports provided to consumers’ potential employers. Specifically, the CFPB found that the companies violated the law by:

    • Failing to take basic steps to assure accuracy: The CFPB found that the companies failed to use basic procedures for matching public records information to the correct consumer. For example, the Bureau found that GIS did not require employers to provide consumers’ middle names, and neither company had a written policy for researching consumers with common names. The Bureau also found that GIS failed to use an audit process to adequately test the accuracy of the reports provided. The Bureau found that, between 2010 and 2014, nearly 70 percent of criminal history disputes consumers filed with GIS resulted in some change or correction to the information in the consumer’s background report. As a result, the companies provided prospective employers with inaccurate reports that included criminal records attached to the wrong consumers, dismissed and expunged records, and misdemeanors reported as felony convictions. These inaccuracies can result in the denial of employment, missed economic opportunity, and reputational harm to otherwise qualified applicants.
    • Including impermissible information in consumer reports: The CFPB also found that the companies unlawfully included certain information in consumer reports they provided to prospective employers. Specifically, the CFPB found that GIS and BCG failed to take measures to prevent non-reportable civil suit and civil judgment information older than seven years from being illegally included in its reports.

    Enforcement Action
    Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices or who otherwise violate federal consumer financial laws. Under the terms of the CFPB order released today, the companies are required to:

    •  Provide $10.5 million in relief to harmed consumers: The companies must identify consumers negatively affected by their conduct and provide monetary relief. The companies will pay approximately $1,000 to each affected consumer.
    • Revise their compliance procedures: The companies will revise procedures to assure reporting accuracy. These procedures include using algorithms to distinguish records by middle name and match common names and nicknames, using consumer dispute data to determine the root causes of errors, and using software to identify and reconcile discrepancies.
    • Retain an independent consultant: The companies will hire an independent consultant to review and assess the companies’ policies, procedures, staffing levels, and systems. The consultant will also recommend changes and improvements where necessary.
    • Develop a comprehensive audit program: To test the accuracy, integrity, and completeness of the public-record information sourced to generate the companies’ background reports, the company will develop a written audit program. The audit program will be implemented at a frequency necessary to reliably test the accuracy of the companies’ background reports. At least twice a year, the companies will evaluate and adjust the audit program in light of the results and any material changes to the companies’ operations.
    • Pay a civil monetary penalty of $2.5 million: Collectively, the companies will pay a $2.5 million penalty for their illegal actions.

    Prosecutors Snare 15 In Alleged $31M Debt Collection Scam

    Wednesday, October 28th, 2015

    Prosecutors Snare 15 In Alleged $31M Debt Collection Scam

    By Max Stendahl

    (The conduct described is a complaint we commonly receive)

    Law360, New York (October 27, 2015, 3:21 PM ET) — Manhattan federal prosecutors on Tuesday unveiled criminal charges against 15 individuals over an alleged $31 million debt collection scheme that U.S. Attorney Preet Bharara called the largest ever uncovered.

    The charges target 4 Star Resolution LLC, which was sued in February by the Federal Trade Commission and New York Attorney General Eric Schneiderman for allegedly ripping off consumers nationwide. According to an indictment unsealed by Bharara’s office on Tuesday, the Buffalo, New York-based company threatened victims with imminent arrest or legal action unless they made debt payments.

    Prosecutors said 4 Star Resolution CEO Travell Thomas used tens of thousands of dollars in consumer funds to bankroll a gambling habit, purchase tickets to sporting events and pay for his wedding reception and cosmetic surgery for his wife.

    “As alleged, the defendants engaged in what is believed to be the largest fraudulent debt collection scheme ever to be prosecuted, falsely threatening arrest and prosecution of countless Americans, including those who suffered from disabilities,” Bharara said in a statement. “The defendants charged today allegedly took ruthless advantage of the desperate situation in which their victims found themselves, using threats and lies to coerce payment and even trying to collect more money than the victims ever owed.”

    The individuals charged in the indictment include Thomas, 4 Star Resolution Chief Operating Officer Maurice Sessum, and director of operations Anthony Brzezowski. Prosecutors unsealed the guilty pleas of four other employees.

    According to the indictment, 4 Star Resolution routinely tricked victims into paying consumer debts by threatening to have them arrested and hauled into court on criminal fraud charges, have their driver’s licenses suspended or be hit with a civil debt collection lawsuit. The company sometimes held itself out to be a law firm or as an affiliate of the local government or courts, prosecutors said.

    To perpetuate the scheme, 4 Star Resolution allegedly used legal jargon, claiming that victims had “breached a contractual agreement,” committed “theft of goods and services” and engaged in “malicious intent to defraud a financial institution.”

    Prosecutors said the company had also falsely inflated the balances of consumers’ debts, a practice known within the company as “juicing.”

    The criminal charges come as the FTC and New York attorney general are seeking to prolong an asset freeze in the related civil case in the Western District of New York. Officials said in an Aug. 5 court filing that less than $1.2 million of the total funds collected by 4 Star Resolution remained in the estate of a court-appointed receiver and in the frozen bank accounts of Thomas and other company executives.

    The government is represented by Edward Imperatore and Jordan Estes.

    Counsel information for the defendants was not immediately available.

    The case is USA v. Thomas et al., case number 15-cr-00667, in the U.S. District Court for the Southern District of New York.

    Private student loans

    Friday, October 23rd, 2015

    Please contact us if you are in Illinois and you have a private student loan serviced by Navient or SLM.

    A Student Loan System Stacked Against the Borrower

    Monday, October 12th, 2015


    A Student Loan System Stacked Against the Borrower
    New York Times, OCT. 9, 2015

    Patrick Wittwer, a Philadelphia resident and 2008 graduate of Temple University, said he paid $756 a month for his student loans and had experienced problems like misdirected payments and abusive collection tactics. Credit Jessica Kourkounis for The New York Times
    Fair Game

    “It feels like I’m being set up to fail.”

    That’s how Patrick Wittwer, 31, described his experience trying to repay his roughly $50,000 in student loans. Between misdirected payments by one of the companies servicing his loan and the abusive collection tactics he encountered when he fell behind, Mr. Wittwer said the repayment process simply seemed stacked against him.

    A 2008 graduate of Temple University with a degree in media arts, Mr. Wittwer is not alone in his experience. Consumer advocates say student-loan servicers often make an already heavy debt load even more burdensome for borrowers.

    A report issued late last month by the Consumer Financial Protection Bureau supports this view. Even though the economy and labor market have improved, student loan borrowers are experiencing high distress levels compared with borrowers with other types of consumer debt, the government report found. More than one in four student loan borrowers are delinquent or in default on their obligations.

    In the aftermath of the financial crisis, we learned repeatedly about dubious practices among mortgage servicing companies that made it harder for homeowners trying to repay or renegotiate their loans. Now, similar horror stories are emerging about the companies servicing student loans.

    Some 41 million Americans owe $1.2 trillion in student loan debt. The median debt burden among borrowers was $20,000 in 2014, up from $13,000 in 2007.

    Companies servicing these loans manage borrowers’ accounts, process their payments and enroll them in alternative repayment plans, including those based on a fixed share of the borrowers’ income. Among the biggest companies are Navient, Great Lakes and Discover Bank.

    The Education Department has contracts with 11 loan servicers. But with no federal standards governing these activities, student-loan servicers have great leeway in their practices. Making matters worse, borrowers are not allowed to choose their servicers, so if they encounter problems, they cannot take their business elsewhere.

    “Good loan servicing is expensive,” Maura Dundon, senior policy counsel at the Center for Responsible Lending, said in a recent interview. “It requires reaching out and talking to people, and servicers don’t do it because they don’t get compensated for that. This is the fault of servicers, but it’s also the fault of the Department of Education for not writing this into their contracts.”

    Denise Horn, a spokeswoman for the Education Department, said the agency continues to strengthen the federal direct loan program “to ensure all students and families receive the highest quality support from their federal loan servicers.” She added: “Everyone needs to do more to protect student loan borrowers — including servicers — and we’ll continue to take steps to strengthen the program and enhance oversight.”

    A recent questionnaire by Young Invincibles, a research and advocacy organization focused on advancing economic opportunity for young adults, points to some of the weaknesses in student loan servicing.


    One common borrower complaint among the roughly 1,200 people who responded to the survey was that servicers simply fail to follow instructions. Borrowers hoping to reduce both the cost and the length of their repayment period, for example, often ask servicers to steer payments toward higher-cost loans first. In a number of cases, recipients said, the companies ignored these requests.

    “For servicers to ignore or do the opposite thing that a borrower would request is indicative of something very negative going on in the industry,” said Jennifer Wang, policy director at Young Invincibles.

    Improper levying of late fees was another practice cited by those shouldering student loans. So were losing paperwork and making repeated requests for documentation.

    Perhaps the biggest problem cited by borrowers and their advocates was the failure of student loan servicers to advise their customers of the full array of repayment plans available to them. In many cases, this means borrowers do not know they are eligible for loan relief and do not receive it.

    Such relief includes repayment plans for federal loans based on a borrower’s income and family size, or debt forgiveness programs for borrowers who work in public service. Military service members also have a right to a lower interest rate while they are on active duty.

    But many eligible borrowers don’t hear about these options, advocates say. An August report from the Government Accountability Office estimated that 51 percent of student loan borrowers nationwide are eligible for income-based repayment plans, but only 15 percent are enrolled.

    Rather than offer one of these programs, servicers often suggest loan forbearance, in which the borrower stops making payments temporarily. But because interest keeps piling up on the loan during the forbearance period, this is an expensive alternative. And some private student loan servicers charge a $150 fee to put an account into forbearance.

    Servicers say the complexity of federal student loan arrangements creates problems both for their workers who must try to explain these deals and for borrowers who need to understand them.

    But servicers receive $600 million a year for their work, and explaining loan terms is surely one of the jobs they are being paid to perform. “For a servicer to see a student loan borrower struggle and not help them get into the right repayment plan is a huge customer service failure,” Ms. Wang said.

    It is also a taxpayer risk, given that such practices raise a borrower’s potential to default.

    Mr. Wittwer, who lives in Philadelphia, said he had encountered difficulties with some of his loan payments even though he arranged for them to be deducted automatically from his bank account last year.

    “After six or seven months, I get a late notice for my federal loans and I go in to my bank and double-check that the loan was being paid,” he said. “My loans had been transferred to another office, but the original office had kept collecting it.”

    It took about a month to fix the problem, Mr. Wittwer said. “You have to be hypervigilant about it because student loans are constantly being sold and moved.”


    Ms. Dundon of the Center for Responsible Lending said that the Education Department had fixed some of the problems in its servicing contracts but that financial incentives were still misaligned in certain areas. For example, service companies receive more money if the loans they oversee are being paid off, and less if borrowers stop paying. While this system encourages servicers to keep borrowers current — a good thing — it discourages them from working with borrowers who fall behind.

    Mr. Wittwer said he is currently paying $756 a month on his student loans, the minimum amount. He acknowledged that he did not understand the consequences of the sky-high interest rates on his loans when he took them on. But his credit score is rising and he has a job.

    The Consumer Financial Protection Bureau is talking about rules to standardize student loan servicing practices. In the meantime, its enforcement unit has student loan servicing companies under the microscope. It brought a case against Discover Bank last summer, saying it inflated the amounts it said borrowers owed on their loans.

    Discover Bank paid $18.5 million without admitting or denying wrongdoing.

    Repaying a student loan is challenging enough without servicers adding to the burden with incompetence or dubious practices. Borrowers and taxpayers deserve better.

    Consumers could soon find it easier to sue their banks

    Sunday, October 11th, 2015

    Consumers could soon find it easier to sue their banks


    The Consumer Financial Protection Bureau is getting closer to creating rules that would make it easier for consumers to sue banks, credit card issuers, and other companies selling financial products.  The proposals being considered target arbitration clauses — restrictions often included in the fine print of contracts for financial products such as credit cards, student loans, and checking accounts — that the average person knows little about. The clauses typically bar people from suing companies or joining class action lawsuits when legal issues come up, instead steering them into arbitration, a process that some critics say is often stacked in the company’s favor. The rules being considered by the CFPB would prohibit companies from blocking class action lawsuits. Companies also would be required to report the outcomes of arbitration cases to the CFPB. The bureau will meet with small business groups this month to discuss the rules. A formal rule proposal could come this year.


    Write the CFPB and express support for the proposal:


    Wednesday, October 7th, 2015

    October 7, 2015

    Office of Communications
    Tel: (202) 435-7170

    Proposal Would End the Free Pass Companies Use Against Group Lawsuits

    WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) announced it is considering proposing rules that would ban consumer financial companies from using “free pass” arbitration clauses to block consumers from suing in groups to obtain relief. Buried in many contracts for consumer financial products like credit cards and bank accounts, most arbitration clauses deny consumers the right to participate in group lawsuits against companies. With this free pass, companies can sidestep the legal system, avoid big refunds, and continue to pursue profitable practices that may violate the law and harm countless consumers. The CFPB’s proposals under consideration would give consumers their day in court and deter companies from wrongdoing.

    “Consumers should not be asked to sign away their legal rights when they open a bank account or credit card,” said CFPB Director Richard Cordray. “Companies are using the arbitration clause as a free pass to sidestep the courts and avoid accountability for wrongdoing. The proposals under consideration would ban arbitration clauses that block group lawsuits so that consumers can take companies to court to seek the relief they deserve.”

    Many contracts for consumer financial products and services include arbitration clauses. These clauses typically state that either the company or the consumer can require disputes about that product to be resolved by privately appointed individuals (arbitrators), rather than through the court system. Where such a clause exists, either side can generally block lawsuits from proceeding in court. These clauses also typically bar consumers from bringing group claims through the arbitration process. There are arbitration clauses in all kinds of consumer financial products, from bank accounts to private student loans. They affect tens of millions of consumers. As a result, no matter how many consumers are injured by the same conduct, consumers must resolve their claims individually against the company, which few consumers do.

    In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress required the CFPB to study the use of arbitration clauses in consumer financial markets and gave the Bureau the power to issue regulations that are in the public interest, for the protection of consumers, and consistent with the study’s findings. The CFPB’s study – released in March of this year – showed that arbitration clauses restrict consumers’ relief for disputes with financial service providers by allowing companies to block group lawsuits.

    The study also found that, in the consumer finance markets studied, very few consumers individually seek relief through arbitration or the federal courts, while millions of consumers are eligible for relief each year through group settlements. According to the study, more than 75 percent of consumers surveyed in the credit card market did not know whether they were subject to an arbitration clause in their contract. Fewer than 7 percent of those consumers covered by arbitration clauses realized that the clauses restricted their ability to sue in court.

    Today, the Bureau is publishing an outline of the proposals under consideration in preparation for convening a Small Business Review Panel to gather feedback from small industry stakeholders. This is the first step in the process of a potential rulemaking on this issue. The proposals being considered would ban companies from including arbitration clauses that block class action lawsuits in their consumer contracts. This would apply to most consumer financial products and services that the CFPB oversees, including credit cards, checking and deposit accounts, prepaid cards, money transfer services, certain auto loans, auto title loans, small dollar or payday loans, private student loans, and installment loans.

    The proposals being considered would not ban arbitration clauses in their entirety. However, the clauses would have to say explicitly that they do not apply to cases filed as class actions unless and until the class certification is denied by the court or the class claims are dismissed in court. The proposals under consideration would also require that companies that choose to use arbitration clauses for individual disputes submit to the CFPB the arbitration claims filed and awards issued. This will allow the Bureau to monitor consumer finance arbitrations to ensure that the process is fair for consumers. The Bureau is also considering publishing the claims and awards on its website so the public can monitor them.

    The benefits of the proposals would include:

    • A day in court for consumers: The proposals under consideration would give consumers their day in court to hold companies accountable for wrongdoing. Often the harm to an individual consumer may be too small to make it practical to pursue litigation, even where the overall harm to consumers is significant. Previous CFPB survey results reported that only around 2 percent of consumers surveyed would consult an attorney to pursue an individual lawsuit as a means of resolving a small-dollar dispute. In cases involving small injuries of anything less than a few thousand dollars, it can be difficult for a consumer to find a lawyer to handle their case. Congress and the courts developed class litigation procedures in part to address concerns like these. With group lawsuits, consumers have opportunities to obtain relief they otherwise might not get.
    • Deterrent effect: The proposals under consideration would incentivize companies to comply with the law to avoid lawsuits. Arbitration clauses enable companies to avoid being held accountable for their conduct; that makes companies more likely to engage in conduct that could violate consumer protection laws or their contracts with customers. When companies can be called to account for their misconduct, public attention on the cases can affect or influence their individual business practices and the business practices of other companies more broadly.
    • Increased transparency: The proposals under consideration would make the individual arbitration process more transparent by requiring companies that use arbitration clauses to submit the claims filed and awards issued in arbitration to the CFPB. This would enable the CFPB to better understand and monitor arbitration cases. The proposal under consideration to publish the claims filed and awards issued on the CFPB’s website would further increase transparency.

    In addition to consulting with small business representatives, the Bureau will continue to seek input from the public, consumer groups, industry, and other stakeholders before continuing with the process of a rulemaking. When the Bureau issues proposed regulations, the public is invited to submit written comments which will be carefully considered before final regulations are issued.

    An outline of the proposals under consideration is available at:

    A list of questions on which the Bureau will seek input from the small business representatives providing feedback to the Small Business Review Panel will be available on Wednesday at:

    The March 2015 report on arbitration is available at:

    A factsheet summarizing the Small Business Review Panel process can be found at: