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    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


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    Threats of credit reporting

    Thursday, February 23rd, 2017

    Please contact us if you receive a collection letter referring to credit reporting.

    National Collegiate Student Loans

    Wednesday, February 22nd, 2017

    Please contact us if you have received a collection letter on a National Collegiate student loan.

    Student Loan Debt Collector Will Pay $700,000 for Unlawful Collection Calls in Settlement with FTC

    Tuesday, February 14th, 2017

    GC Services, a large debt collector charged with using unlawful tactics to collect on federal student loans and other debts, will pay a $700,000 civil penalty under a settlement with the Federal Trade Commission.

    Student loan debt is a large and growing segment of the U.S. debt collection industry, according to the FTC. More than 40 million consumers have outstanding loan debt, carrying an average balance of $29,000. GC Services is a third-party debt collector of defaulted federal student loans and other types of debt.

    The FTC’s complaint against GC Services Limited Partnership, filed on the FTC’s behalf by the Department of Justice, alleged that the company’s collectors left phone messages that illegally disclosed purported debts to others without their permission.

    GC Services employees also called consumers multiple times after being told that the person who answered did not owe the debt, that they had called the wrong person, or that the person they wanted could not be reached there. According to the FTC, GC Services also falsely claimed that it would take steps to prevent its employees from making unlawful calls to third parties to find a debtor.

    Under the stipulated order announced today, GC Services is prohibited from violating the Fair Debt Collection Practices Act and from making the alleged claims at issue in the complaint.

    The Commission vote to authorize the staff to refer the civil penalty complaint to the DOJ and to approve the proposed stipulated final order was 3-0. The DOJ filed the complaint and proposed order on behalf of the Commission in the U.S. District Court for the Southern District of Texas.

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

    Stratford Career Institute Agrees to Settle FTC Charges

    Saturday, February 4th, 2017

    Misled Consumers About High School ‘Diploma’ Course

    Stratford Career Institute has agreed to stop making allegedly deceptive claims about educational programs under a settlement with the Federal Trade Commission.

    The settlement resolves FTC charges brought in February 2016, alleging that the correspondence school misled consumers about its high school “diploma” program, which failed to meet the basic requirements set by most states. Consumer complaints and Stratford’s records showed that consumers who tried to use the company’s diplomas were often told by prospective employers and college admissions officers that the program was not equivalent to a traditional high school diploma.

    Under the stipulated order, Stratford is prohibited from making false claims about educational programs and, when marketing high school equivalency programs, it is required to disclose that some schools and employers may not recognize the diploma or equivalency credential.

    The order also requires Stratford to notify current students of their right to cancel enrollment in the high school diploma program, and to stop efforts to collect money from those who cancel.

    The settlement imposes a $6.5 million judgment that will be partially suspended when the company has paid $250,000. The full judgment will become due immediately if Stratford is found to have misrepresented its financial condition. For more information, consumers should visit ftc.gov/stratford.

    The Commission vote approving the stipulated final order was 3-0. The U.S. District Court for the Northern District of Ohio entered the order on January 31, 2017.

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

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS MASTERCARD AND UNIRUSH TO PAY $13 MILLION FOR RUSHCARD BREAKDOWNS THAT CUT OFF CONSUMERS’ ACCESS TO FUNDS

    Wednesday, February 1st, 2017

    CONSUMER FINANCIAL PROTECTION BUREAU ORDERS MASTERCARD AND UNIRUSH TO PAY $13 MILLION FOR RUSHCARD BREAKDOWNS THAT CUT OFF CONSUMERS’ ACCESS TO FUNDS

    Preventable Failures Left Tens of Thousands of Economically Vulnerable Consumers Unable to Pay for Necessities

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau today took action against Mastercard and UniRush for breakdowns that left tens of thousands of economically vulnerable RushCard users unable to access their own money to pay for basic necessities. In October 2015, a rash of preventable failures by Mastercard and UniRush meant that many customers could not use their RushCard to get their paychecks and other direct deposits, take out cash, make purchases, pay bills, or get accurate balance information. UniRush then failed to provide customer service to many consumers who reached out for help during the service breakdown. The CFPB has ordered Mastercard and UniRush to pay an estimated $10 million in restitution to tens of thousands of harmed customers. The CFPB also fined Mastercard and UniRush $3 million.

    “Mastercard and UniRush’s failures cut off tens of thousands of vulnerable consumers from their own money, and threw some into a personal financial crisis,” said CFPB Director Richard Cordray. “The companies must set things right for consumers and make sure such devastating service disruptions are not repeated.”

    UniRush LLC is a Delaware corporation headquartered near Cincinnati, Ohio. It is the program manager for RushCard, a reloadable prepaid debit card co-founded by entrepreneur Russell Simmons, and oversees operations such as the cardholder website. Mastercard International Inc. is a global financial services business incorporated in Delaware and headquartered in Purchase, N.Y. One of its units, Mastercard Payment Transaction Services, is the current payment processor for the RushCard.

    RushCard is advertised as a way for consumers to get direct deposits on their card “up to two days sooner.” These deposits include government benefits or payroll funds. In 2014, UniRush picked Mastercard as its new payment processor. Mastercard and UniRush spent 13 months preparing to switch to Mastercard’s processing platform, which ultimately took place Oct. 10-12, 2015. At the time of the switch, RushCard had about 650,000 active users, of which about 270,000 received direct deposits on their RushCard.

    Mastercard and UniRush’s actions before, during, and after the changeover harmed tens of thousands of consumers. The CFPB received about 830 consumer complaints from RushCard users in the weeks that followed the switch in payment processors. By comparison, the CFPB received 147 complaints about prepaid cards from November 2014 to January 2015. As a result of its preventable failures, the CFPB found that Mastercard or UniRush:

    • Denied consumers access to their own money: UniRush did not accurately transfer all accounts to Mastercard. As a result, thousands of consumers could not access funds stored on their cards for days, or in some circumstances, weeks. Because of Mastercard’s actions, accounts of about 1,110 consumers were incorrectly suspended. UniRush also delayed crediting cash deposits to consumers’ accounts and shut off access to certain funds that consumers put aside for savings. UniRush did not issue a working replacement card to consumers whose cards were lost or stolen during this period.
    • Botched the processing of deposits and payments: UniRush delayed processing direct deposits for more than 45,000 consumers, and did not process or improperly returned deposits of 2,000 others. As a result, consumers could not access their paychecks or government benefits. UniRush also erroneously double posted deposits and did not promptly process electronic debit transactions, which falsely inflated those RushCard holders’ account balances. As a result, thousands of consumers accidentally spent more money than was loaded on their RushCard. With no advance notice to consumers, UniRush used funds consumers subsequently loaded onto their RushCards to offset negative balances caused by its processing errors.
    • Gave consumers inaccurate account information: Mastercard did not make sure it was sending accurate information about consumers’ account balances to UniRush when it declined to authorize certain transactions. As a result, some consumers received incorrect information telling them their account balances were zero, when the consumers actually had funds stored on their cards.
    • Failed to provide customer service to consumers impacted by the breakdowns: UniRush did not have an adequate plan to step up its customer service response to meet the increased demand caused by service disruptions. Even after hiring additional personnel, UniRush failed to train customer service agents in time to meet the surge in demand. As a result, some consumers who called customer service waited on hold for hours and could not obtain critical information about the status of their funds and accounts.

    Enforcement Action
    Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is authorized to take action against institutions engaged in unfair, deceptive, or abusive acts or practices, or that otherwise violate federal consumer financial laws. The lack of preparation and testing by Mastercard and UniRush, as well as multiple preventable failures, adversely impacted consumers, including by denying them access to their own money. Under the terms of the consent orders, Mastercard and UniRush must:

    • Pay an estimated $10 million in restitution to tens of thousands of harmed consumers: Mastercard and UniRush must pay an estimated $10 million in restitution to tens of thousands of customers who could not access their funds or who suffered other problems created or worsened by the failures and subsequent actions. Under the terms of the Bureau’s order, the amount each consumer will receive depends on the particular failure the consumer experienced. UniRush will send funds to affected consumers.
    • Draw up a plan to prevent future problems: Mastercard and UniRush must devise a plan to prevent future service disruptions. The CFPB will monitor the companies for compliance as they implement the plan.
    • Pay a $3 million civil penalty: Mastercard and UniRush must pay a civil money penalty of $3 million to the CFPB Civil Penalty Fund.

    The consent order against Mastercard and UniRush is available at: http://files.consumerfinance.gov/f/documents/201702_cfpb_UniRush-Mastercard-consent-order.pdf

     

    CREDIT CORP SOLUTIONS

    Saturday, January 28th, 2017

    Please contact us if Credit Corp Solutions is attempting to collect money from you in Illinois.

    Certain Homeopathic Teething Products: FDA Warning – Confirmed Elevated Levels of Belladonna

    Friday, January 27th, 2017

    MedWatch – The FDA Safety Information and Adverse Event Reporting Program

    Certain Homeopathic Teething Products: FDA Warning – Confirmed Elevated Levels of Belladonna

    AUDIENCE: Consumer

    ISSUE: FDA announced that its laboratory analysis found inconsistent amounts of belladonna, a toxic substance, in certain homeopathic teething tablets, sometimes far exceeding the amount claimed on the label. The agency is warning consumers that homeopathic teething tablets containing belladonna pose an unnecessary risk to infants and children and urges consumers not to use these products.

    In light of these findings, the FDA contacted Standard Homeopathic Company in Los Angeles, the manufacturer of Hyland’s homeopathic teething products, regarding a recall of its homeopathic teething tablet products labeled as containing belladonna, in order to protect consumers from inconsistent levels of belladonna. At this time, the company has not agreed to conduct a recall.

    BACKGROUND: Homeopathic teething products have not been evaluated or approved by the FDA for safety or effectiveness. The agency is unaware of any proven health benefit of the products, which are labeled to relieve teething symptoms in children. In September 2016, the FDA warned against the use of these products after receiving adverse event reports.

    In November 2016, Raritan Pharmaceuticals (East Brunswick, New Jersey) recalled three belladonna-containing homeopathic products, two of which were marketed by CVS.

    RECOMMENDATION: The FDA recommends that consumers stop using these products marketed by Hyland’s immediately, and dispose of any in their possession.

    Consumers should seek medical care immediately if their child experiences seizures, difficulty breathing, lethargy, excessive sleepiness, muscle weakness, skin flushing, constipation, difficulty urinating, or agitation after using homeopathic teething products.

    Healthcare professionals and patients are encouraged to report adverse events or side effects related to the use of these products to the FDA’s MedWatch Safety Information and Adverse Event Reporting Program:

    • Complete and submit the report Online: www.fda.gov/MedWatch/report
    • Download form or call 1-800-332-1088 to request a reporting form, then complete and return to the address on the pre-addressed form, or submit by fax to 1-800-FDA-0178

    Read the MedWatch safety alert, including a link to the FDA news release, at:

    http://www.fda.gov/Safety/MedWatch/SafetyInformation/SafetyAlertsforHumanMedicalProducts/ucm538687.htm

    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