The marketers of a weight-loss system advertised as using “breakthrough technology” and “personalized supplements” to help consumers permanently lose “20 to 40+ pounds in 40 days” without significantly cutting calories, have agreed to settle a Federal Trade Commission complaint that the claims were deceptive and not supported by scientific evidence.
The court order settling the FTC’s charges bars the sellers of the “NutriMost Ultimate Fat Loss System” from making the deceptive claims alleged in the complaint, as well as providing others, including franchisees, with the means of deceiving consumers. The defendants also will pay $2 million to provide refunds to consumers defrauded by buying the system directly from the defendants, not from franchisees.
According to the FTC’s complaint, since fall 2012, NutriMost, LLC; NutriMost Doctors, LLC; and their owner Raymond Wisniewski deceptively marketed the NutriMost weight-loss program to consumers. Sold at Wisniewski’s eight locations in the Pittsburgh area and by franchisees and licensees nationwide, the NutriMost System was marketed as using a new technology that would allow users to safely lose substantial amounts of weight – typically 20 to 40 pounds or more in 40 days.
On their websites, on Facebook, and in traditional radio and newspaper ads, the defendants claimed the NutriMost System does not involve a restrictive diet, causes permanent weight loss, and helps users burn between 2,000 and 7,000 calories of fat per day. Claiming that the system would “Turn OFF fat storage and Turn ON fat burning,” the defendants charged consumers $1,895 for the program.
The system was promoted, without appropriate support, as “having the technology to access nearly every factor of fat burning, fat storage and metabolism,” using a scan to address the “body’s top organ stressors, as well as find the best products to balance those . . . stressors.” What the defendants allegedly failed to say, however, was that to achieve the weight loss advertised, users would have to follow a restrictive diet, including a very low-calorie diet of about 500 calories a day. Only after they bought the system were consumers told of the extreme caloric restrictions, the FTC alleges.
The complaint charges the defendants with using endorsements and testimonials for the system without disclosing that the endorsers had material connections to the defendants or their franchisees. The FTC also alleges that the defendants required buyers to sign a contract agreeing not to make any negative statements or comments about the NutriMost System, and that if consumers violated this requirement, they would have to pay the defendants $35,999. Finally, the defendants also allegedly provided program licensees and franchisees with the means to violate the FTC Act by giving them misleading and deceptive marketing materials, as well as the form contract containing the gag clause prohibiting negative reviews.
The order settling the FTC’s complaint prohibits the defendants from making weight-loss and health claims unless they are not misleading and are supported with competent and reliable scientific evidence. It also bars the defendants from misrepresenting that users do not need to follow a restrictive diet.
Next, it requires the defendants to disclose that their program includes a diet of less than 800 calories a day, if it does, and, if defendants make any representation regarding the safety of a program that includes a diet of less than 800 calories a day, then they must also disclose that physician monitoring is required to minimize the potential for health risks.
The order prohibits the defendants from using deceptive endorsements in their marketing materials and from including non-disparagement clauses in their contracts. It also bars them from providing others with the means of making deceptive statements regarding weight-loss products or programs. Finally, it imposes a $32 million judgment against the defendants, which will be suspended based on defendants’ financial condition after they pay $2 million for consumer refunds.
The Commission vote authorizing the staff to file the complaint and to approve the stipulated proposed order was 2-0. The FTC filed the complaint and proposed order in the U.S. District Court for the Western District of Pennsylvania. The FTC received assistance in investigating this case from Pittsburgh’s Better Business Bureau serving Western Pennsylvania.
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 court orders have the force of law when approved and signed by the District Court judge
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CONSUMER FINANCIAL PROTECTION BUREAU SUES OCWEN FOR FAILING BORROWERS THROUGHOUT MORTGAGE SERVICING PROCESS
CONSUMER FINANCIAL PROTECTION BUREAU SUES OCWEN FOR FAILING BORROWERS THROUGHOUT MORTGAGE SERVICING PROCESS
Mortgage Servicer’s Widespread Errors, Shortcuts, and Runarounds Cost Borrowers Money, Homes
WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) today sued one of the country’s largest nonbank mortgage loan servicers, Ocwen Financial Corporation, and its subsidiaries for failing borrowers at every stage of the mortgage servicing process. The Bureau alleges that Ocwen’s years of widespread errors, shortcuts, and runarounds cost some borrowers money and others their homes. Ocwen allegedly botched basic functions like sending accurate monthly statements, properly crediting payments, and handling taxes and insurance. Allegedly, Ocwen also illegally foreclosed on struggling borrowers, ignored customer complaints, and sold off the servicing rights to loans without fully disclosing the mistakes it made in borrowers’ records. The Florida Attorney General took a similar action against Ocwen today in a separate lawsuit. Many state financial regulators are also independently issuing cease-and-desist and license revocation orders against Ocwen for escrow management and licensing issues today.
“Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes,” said CFPB Director Richard Cordray. “Borrowers have no say over who services their mortgage, so the Bureau will remain vigilant to ensure they get fair treatment.”
Ocwen, headquartered in West Palm Beach, Fla., is one of the nation’s largest nonbank mortgage servicers. As of Dec. 31, 2016, Ocwen serviced almost 1.4 million loans with an aggregate unpaid principal balance of $209 billion. It services loans for borrowers in all 50 states and the District of Columbia. A mortgage servicer collects payments from the mortgage borrower and forwards those payments to the owner of the loan. It handles customer service, collections, loan modifications, and foreclosures. Ocwen specializes in servicing subprime or delinquent loans.
The CFPB uncovered substantial evidence that Ocwen has engaged in significant and systemic misconduct at nearly every stage of the mortgage servicing process. The CFPB is charged with enforcing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which protects consumers from unfair, deceptive, or abusive acts or practices, and other federal consumer financial laws. In addition, the Bureau adopted common-sense rules for the mortgage servicing market that first took effect in January 2014. The CFPB’s mortgage servicing rules require that servicers promptly credit payments and correct errors on request. The rules also include strong protections for struggling homeowners, including those facing foreclosure. In its lawsuit, the CFPB alleges that Ocwen:
- Serviced loans using error-riddled information: Ocwen uses a proprietary system called REALServicing to process and apply borrower payments, communicate payment information to borrowers, and maintain loan balance information. Ocwen allegedly loaded inaccurate and incomplete information into its REALServicing system. And even when data was accurate, REALServicing generated errors because of system failures and deficient programming. To manage this risk, Ocwen tried manual workarounds, but they often failed to correct inaccuracies and produced still more errors. Ocwen then used this faulty information to service borrowers’ loans. In 2014, Ocwen’s head of servicing described its system as “ridiculous” and a “train wreck.”
- Illegally foreclosed on homeowners: Ocwen has long touted its ability to service and modify loans for troubled borrowers. But allegedly, Ocwen has failed to deliver required foreclosure protections. As a result, the Bureau alleges that Ocwen has wrongfully initiated foreclosure proceedings on at least 1,000 people, and has wrongfully held foreclosure sales. Among other illegal practices, Ocwen has initiated the foreclosure process before completing a review of borrowers’ loss mitigation applications. In other instances, Ocwen has asked borrowers to submit additional information within 30 days, but foreclosed on the borrowers before the deadline. Ocwen has also foreclosed on borrowers who were fulfilling their obligations under a loss mitigation agreement.
- Failed to credit borrowers’ payments: Ocwen has allegedly failed to appropriately credit payments made by numerous borrowers. Ocwen has also failed to send borrowers accurate periodic statements detailing the amount due, how payments were applied, total payments received, and other information. Ocwen has also failed to correct billing and payment errors.
- Botched escrow accounts: Ocwen manages escrow accounts for over 75 percent of the loans it services. Ocwen has allegedly botched basic tasks in managing these borrower accounts. Because of system breakdowns and an over-reliance on manually entering information, Ocwen has allegedly failed to conduct escrow analyses and sent some borrowers’ escrow statements late or not at all. Ocwen also allegedly failed to properly account for and apply payments by borrowers to address escrow shortages, such as changes in the account when property taxes go up. One result of this failure has been that some borrowers have paid inaccurate amounts.
- Mishandled hazard insurance: If a servicer administers an escrow account for a borrower, a servicer must make timely insurance and/or tax payments on behalf of the borrower. Ocwen, however, has allegedly failed to make timely insurance payments to pay for borrowers’ home insurance premiums. Ocwen’s failures led to the lapse of homeowners’ insurance coverage for more than 10,000 borrowers. Some borrowers were pushed into force-placed insurance.
- Bungled borrowers’ private mortgage insurance: Ocwen allegedly failed to cancel borrowers’ private mortgage insurance, or PMI, in a timely way, causing consumers to overpay. Generally, borrowers must purchase PMI when they obtain a mortgage with a down payment of less than 20 percent, or when they refinance their mortgage with less than 20 percent equity in their property. Servicers must end a borrower’s requirement to pay PMI when the principal balance of the mortgage reaches 78 percent of the property’s original value. Since 2014, Ocwen has failed to end borrowers’ PMI on time after learning information in its REALServicing system was unreliable or missing altogether. Ocwen ultimately overcharged borrowers about $1.2 million for PMI premiums, and refunded this money only after the fact.
- Deceptively signed up and charged borrowers for add-on products: When servicing borrowers’ mortgage loans, Ocwen allegedly enrolled some consumers in add-on products through deceptive solicitations and without their consent. Ocwen then billed and collected payments from these consumers.
- Failed to assist heirs seeking foreclosure alternatives: Ocwen allegedly mishandled accounts for successors-in-interest, or heirs, to a deceased borrower. These consumers included widows, children, and other relatives. As a result, Ocwen failed to properly recognize individuals as heirs, and thereby denied assistance to help avoid foreclosure. In some instances, Ocwen foreclosed on individuals who may have been eligible to save these homes through a loan modification or other loss mitigation option.
- Failed to adequately investigate and respond to borrower complaints: If an error is made in the servicing of a mortgage loan, a servicer must generally either correct the error identified by the borrower, called a notice of error, or investigate the alleged error. Since 2014, Ocwen has allegedly routinely failed to properly acknowledge and investigate complaints, or make necessary corrections. Ocwen changed its policy in April 2015 to address the difficulty its call center had in recognizing and escalating complaints, but these changes fell short. Under its new policy, borrowers still have to complain at least five times in nine days before Ocwen automatically escalates their complaint to be resolved. Since April 2015, Ocwen has received more than 580,000 notices of error and complaints from more than 300,000 different borrowers.
- Failed to provide complete and accurate loan information to new servicers: Ocwen has allegedly failed to include complete and accurate borrower information when it sold its rights to service thousands of loans to new mortgage servicers. This has hampered the new servicers’ efforts to comply with laws and investor guidelines.
The Bureau also alleges that Ocwen has failed to remediate borrowers for the harm it has caused, including the problems it has created for struggling borrowers who were in default on their loans or who had filed for bankruptcy. For these groups of borrowers, Ocwen’s servicing errors have been particularly costly.
Through its complaint, filed in federal district court for the Southern District of Florida, the CFPB seeks a court order requiring Ocwen to follow mortgage servicing law, provide relief for consumers, and pay penalties. The complaint is not a finding or ruling that the defendants have actually violated the law.
The lawsuit is available at: http://files.consumerfinance.gov/f/documents/20170420_cfpb_Ocwen-Complaint.pdf
CFPB Files Suit Against Law Firm for Misrepresenting Attorney Involvement in Collection of Millions of Debts
WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit in a federal district court against the debt collection law firm Weltman, Weinberg & Reis for falsely representing in millions of collection letters sent to consumers that attorneys were involved in collecting the debt. The law firm made statements on collection calls and sent collection letters creating the false impression that attorneys had meaningfully reviewed the consumer’s file, when no such review has occurred. The CFPB is seeking to stop the unlawful practices and recoup compensation for consumers who have been harmed.
“Debt collectors who misrepresent that a lawyer was involved in reviewing a consumer’s account are implying a level of authority and professional judgement that is just not true,” said CFPB Director Richard Cordray. “Weltman, Weinberg & Reis masked millions of debt collection letters and phone calls with the professional standards associated with attorneys when attorneys were, in fact, not involved. Such illegal behavior will not be allowed in the debt collection market.”
Weltman, Weinberg & Reis, based in Cleveland, Ohio, regularly collects debt related to credit cards, installment loan contracts, mortgage loans, and student loans. It collects on debts nationwide but only files collection lawsuits in seven states: Illinois, Indiana, Kentucky, Michigan, New Jersey, Ohio, and Pennsylvania.
The CFPB alleges that the firm engaged in illegal debt collection practices. In form demand letters and during collection calls to consumers, the firm implied that lawyers had reviewed the veracity of a consumer’s debt. But typically, no attorney had reviewed any aspect of a consumer’s individual debt or accounts. No attorney had assessed any consumer-specific information. And no attorney had made any individual determination that the consumer owed the debt, that a specific letter should be sent to the consumer, that a consumer should receive a call, or that the account was a candidate for litigation.
The CFPB alleges that the company is violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Since at least July 21, 2011, the law firm has sent millions of demand letters to consumers. Specifically, the CFPB alleges that the law firm:
- Sent collection letters falsely implying they were from a lawyer: Weltman, Weinberg & Reis sent letters on formal law firm letterhead with the phrase “Attorneys at Law” at the top of the letter and stated the law firm’s name in the signature line. The letters also included a payment coupon indicating that payment should be sent to the firm. Some demand letters referred to possible “legal action” against consumers who did not make payments. Despite these representations, the vast majority of the time, no attorneys had reviewed consumer accounts or made any determination that the consumer owed the debt, that a specific letter should be sent to the consumer, or that the account was a candidate for litigation before these letters were sent.
- Called consumers and falsely implied a lawyer was involved: Weltman, Weinberg & Reis’s debt collectors told consumers during collection calls that they were calling from a law firm. Specifically, sometimes they told consumers that it was the “largest collection law firm in the United States,” or that the debt had been placed with “the collections branch of our law firm.” This implied that attorneys participated in the decision to make collection calls, but no attorney had reviewed consumer accounts before debt collectors called consumers.
The Bureau is seeking to stop the alleged unlawful practices of Weltman, Weinberg & Reis. The Bureau has also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.
The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law.
Please contact us if you have received a collection notice from Loancare
NetSpend Corporation has agreed to settle Federal Trade Commission allegations that the prepaid card company deceived people about access to funds deposited on NetSpend debit cards.
The Commission vote approving the stipulated final order was 2-1, with Acting Chairman Ohlhausen dissenting and issuing a statement. Commissioner McSweeny also issued a statement. On March 31, 2017, the Commission filed a stipulation requesting entry of the order in the United States District Court for the Northern District of Georgia.
NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge. Then-Commissioner (and former Chairwoman) Edith Ramirez registered a vote in the affirmative for the motion to approve this settlement before she left the Commission.
Please contact us if you are in Illinois or Indiana and a debt collector or debt buyer is trying to collect an old debt from you (more than 4 years on a contract for the sale of goods, such as a car, more than 5 years on a credit card in Illinois, more than 6 years on a credit card in Indiana).
FTC Settlement Halts Allegedly Abusive Practices by Company Collecting Debts for More Than 500 Municipalities
FTC Charges Online Marketing Scheme with Deceiving Shoppers — “Free” and “risk-free” trials come with hidden charges
“Free” and “risk-free” trials come with hidden charges
The Federal Trade Commission has charged a group of online marketers with deceptively luring consumers with “free” and “risk-free” trials for cooking gadgets, golf equipment, and access to related online subscription services.
According to the FTC, the defendants asked people for their credit card information to cover shipping and handling, and then charged them for products and services without their consent. The FTC’s complaint alleges that Brian Bernheim, Joshua Bernheim, Jared Coates, Robert Koch AAFE Products Corp., JBE International LLC, BSDC Inc., KADC Inc., Purestrike Inc., and BNRI Corp., formerly known as Bernheim and Rice Inc., violated the FTC Act and the Restore Online Shoppers’ Confidence Act.
According to the complaint, the defendants’ websites, TV infomercials and email deceived consumers by prominently claiming that their products and services were free, without clearly disclosing that they would start charging consumers if they did not cancel their “free trial” or return the “free” products. They also misrepresented their return, refund and cancellation policies. Specifically, they buried these terms in pages of fine print that people could reach only through a tiny hyperlink.
During the purchase process, the defendants signed consumers up for more “free” trials after forcing them to click through as many as 14 upsell pages to reach a final confirmation page. According to the complaint, many of those pages included poorly disclosed, or undisclosed, additional “free trials” that resulted in yet more unauthorized charges.
The defendants marketed their products under various company names, including Kitchen Advance, Gourmet Cooking Online, Gourmet Cooking Rewards, Medicus Golf, Kick X Tour Z Golf Balls, Golf Online Academy, Golf Tour Partners and Purestrike Swing Clinic.
The Commission vote authorizing the staff to file the complaint was 2-0. It was filed in the U.S. District Court for the Southern 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. The case will be decided by the court.
Please contact us if the termination date of private mortgage insurance was extended following a loan modification.
Please contact us if you are in Illinois and someone is trying to collect a private student loan on which there has been no payment for more than five years.