Tuesday, May 9, 2017

CFPB sues online lenders for collecting on usurious loans


RELEASE FROM THE CFPB DATED APRIL 27, 2017 (REPOSTED)

CONSUMER FINANCIAL PROTECTION BUREAU SUES FOUR ONLINE LENDERS FOR COLLECTING ON DEBTS CONSUMERS DID NOT LEGALLY OWE


Bureau Alleges Companies Deceived Consumers About Debt That Was Not Legally Owed


Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today took action against four online lenders – Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. – for deceiving consumers by collecting debt they were not legally owed. In a suit filed in federal court, the CFPB alleges that the four lenders could not legally collect on these debts because the loans were void under state laws governing interest rate caps or the licensing of lenders. The CFPB alleges that the lenders made deceptive demands and illegally took money from consumer bank accounts for debts that consumers did not legally owe. The CFPB seeks to stop the unlawful practices, recoup relief for harmed consumers, and impose a penalty. 
“We are suing four online lenders for collecting on debts that consumers did not legally owe,” said CFPB Director Richard Cordray. "We allege that these companies made deceptive demands and illegally took money from people's bank accounts. We are seeking to stop these violations and get relief for consumers." 
Golden Valley Lending, Inc., Silver Cloud Financial, Inc., Mountain Summit Financial, Inc., and Majestic Lake Financial, Inc. are online installment loan companies in Upper Lake, California. Since at least 2012, Golden Valley Lending and Silver Cloud Financial have offered online loans of between $300 and $1,200 with annual interest rates ranging from 440 percent up to 950 percent. Mountain Summit Financial and Majestic Lake Financial began offering similar loans more recently. 
The Bureau’s investigation showed that the high-cost loans violated licensing requirements or interest-rate caps – or both – that made the loans void in whole or in part in at least 17 states: Arizona, Arkansas, Colorado, Connecticut, Illinois, Indiana, Kentucky, Massachusetts, Minnesota, Montana, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Ohio, and South Dakota. The Bureau alleges that the four lenders are collecting money that consumers do not legally owe. The CFPB’s suit alleges that Golden Valley Lending, Silver Cloud Financial, Mountain Summit Financial, and Majestic Lake Financial violated the Truth in Lending Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. The specific allegations include: 
  • Deceiving consumers about loan payments that were not owed: The lenders pursued consumers for payments even though the loans in question were void in whole or in part under state law and payments could not be collected. The interest rates the lenders charged were high enough to violate usury laws in some states where they did business, and violation of these usury laws renders particular loans void. In addition, the lenders did not obtain licenses to lend or collect in certain states, and the failure to obtain those licenses renders particular loans void. The four lenders created the false impression that they had a legal right to collect payments and that consumers had a legal obligation to pay off the loans. 
  • Collecting loan payments which consumers did not owe: The four lenders made electronic withdrawals from consumers’ bank accounts or called or sent letters to consumers demanding payment for debts that consumers were under no legal obligation to pay. 
  • Failing to disclose the real cost of credit: The lenders’ websites did not disclose the annual percentage rates that apply to the loans. When contacted by prospective borrowers, the lenders’ representatives also did not tell consumers the annual percentage rate that would apply to the loans. 
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 like the Truth in Lending Act. The CFPB is seeking monetary relief for consumers, civil money penalties, and injunctive relief, including a prohibition on collecting on void loans, against Golden Valley and the other lenders. The Bureau’s complaint is not a finding or ruling that the defendant have actually violated the law. 
A copy of the complaint filed in federal district court is available at: http://files.consumerfinance.gov/f/documents/201704_cfpb_Golden-Valley_Silver-Cloud_Majestic-Lake_complaint.pdf 
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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

CFPB catches student loan and mortgage servicers violating the law


Re-post of April 26, 2017 Media Release from the CFPB 

CONSUMER FINANCIAL PROTECTION BUREAU SUPERVISION FINDS SOME STUDENT LOAN AND MORTGAGE SERVICERS ILLEGALLY FAIL TO PROVIDE PROTECTIONS TO BORROWERS


Bureau Recovered $6.1 Million for 16,000 Consumers Harmed By Auto Loan Originators


Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today announced that its recent supervisory work has found that some student loan and mortgage servicers are violating the law by failing to provide struggling borrowers with legal protections. CFPB examiners found that some student loan servicers failed to refund charges imposed on borrowers who had been wrongly denied the right to defer payments while enrolled in school. The report also found that some mortgage servicers did not deliver the required foreclosure protections to borrowers seeking to save their homes, mishandled escrow accounts, and sent incomplete bills. The report also announced that non-public supervisory activities have led to the recovery of about $6.1 million for 16,000 consumers harmed by auto loan originators. 
“We found that some mortgage and student loan servicers are violating the law by failing to provide protections to borrowers,” said CFPB Director Richard Cordray. “Their slipshod practices are putting borrowers at risk of financial failure and we will hold them accountable." 
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise banks and credit unions with more than $10 billion in assets and certain nonbanks. These include mortgage companies, private student lenders, payday lenders, and others defined as “larger participants.” Today’s report, the 15th edition of Supervisory Highlights, covers supervisory activities generally from September-December 2016, and shares observations in the areas of student loan servicing, mortgage servicing, mortgage origination, and fair lending. 
Student Loan ServicingStudent loan servicers are the primary point of contact about loans for the more than 44 million Americans with student debt. It is a Bureau priority to end illegal practices in student loan servicing. Previously, the Bureau reported that borrowers encounter servicing problems driven by incomplete, inaccurate, or untimely reporting of student data. This can cost some borrowers hundreds of dollars or more. In February, the CFPB warned student loan borrowers to take steps to protect themselves from costly student enrollment status data errors. The Department of Education has also warned that these errors can lead to higher loan costs for borrowers and may contribute to student loan delinquency and defaults. In today’s report, Bureau examiners found that student loan servicers: 
  • Routinely acted on flawed information: Most student loan borrowers have a right to postpone payments, called a deferment, while they are enrolled in school. But CFPB examiners found that one or more student loan servicers routinely acted on incorrect information about whether the borrower was enrolled in school. This faulty information was in student data reports used to manage millions of borrowers’ accounts, and was provided by National Student Clearinghouse, an enrollment data reporting company.
  • Failed to reverse charges wrongly imposed on borrowers in school: Because of data errors, one or more student loan servicers routinely failed to reverse certain charges even after it knew it had wrongly ended a deferment. These charges included improper late fees and capitalization of unpaid interest, which occurs when interest that accumulates on a student loan is added to the principal balance. 
Mortgage ServicingMortgage servicers collect payments from the mortgage borrower and forward those payments to the owner of the loan. They typically handle customer service, collections, loan modifications, and foreclosures. Supervision continues to see serious issues for consumers seeking alternatives to foreclosure, or loss mitigation, at certain servicers. Issues identified during recent CFPB examinations include problems with foreclosure protections, premature foreclosure filings,  mishandling of escrow accounts, and incomplete periodic statements. Bureau examiners found one or more servicers: 
  • Kept borrowers in the dark on foreclosure alternatives: One or more servicers failed to identify the additional documents and information borrowers needed to submit to complete a loss mitigation application to avoid foreclosure. They then denied the applications for not including those documents. Supervision directed these servicers to enhance policies, procedures, and monitoring to address the issue. 
  • Prematurely launched the foreclosure process: Servicers cannot take certain steps toward foreclosure once they receive a complete loss mitigation application from a borrower more than 37 days before a foreclosure sale. For instance, servicers cannot make first notice of a foreclosure if a borrower has submitted a complete application for a loan modification or other foreclosure alternative that is still pending review. Bureau examiners found that one or more servicers failed to properly classify applications as complete after receiving the information, and failed to give required foreclosure protections to those consumers.
  • Mishandled escrow accounts: One or more servicers used funds from escrow accounts to pay insurance premiums on unrelated loans. This created shortages in the escrow account and forced higher monthly payments onto consumers. Supervision directed the servicer to give redress to affected consumers, and adopt policies and procedures to ensure that insurance payments are made properly from escrow accounts.
  • Issued incomplete periodic statements: Servicers must provide regular statements that include the amount and due date of the next payment; a breakdown of payments by principal, interest, fees, and escrow; and recent transactions. Examiners found one or more servicers used vague language like “Misc. Expenses” and “Charge for Service” when describing certain costs. These insufficient descriptions failed to comply with the rule. Supervision directed the servicer to modify its descriptions to help consumers understand their fees and charges.
Other HighlightsIn the lead-up to the financial crisis, many consumers ended up in risky mortgages because lenders did not check to see if they could afford to pay back the loan. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, lenders must make a reasonable effort to figure out if a consumer can repay the mortgage before making the loan. Today’s report looks at how CFPB examiners assess compliance with the Ability-to-Repay rule, including requirements on how a lender verifies a consumer’s ability to repay a mortgage loan. This includes whether a creditor’s decision relies on verified assets and not income, and whether it can be based on the size of the down payment for a consumer who otherwise lacks verified income or assets. 
Today’s report also notes that CFPB examiners alerted one or more companies to spikes in complaint volume, prompting the companies to develop remedies. It also discusses the CFPB’s continued development and implementation of a program to directly examine key service providers to help reduce risks to consumers when a company outsources certain activities to those providers. In today’s report, the CFPB also reminds companies that creating incentives for employees and service providers to meet sales and other business goals can lead to consumer harm if those incentives are not properly managed. In addition, the report includes details about updated and expanded publicly available surname data from the U.S. Census Bureau for use in models that may be combined with geography data in CFPB analysis of fair lending practices. 
The report highlights that non-public supervisory activities have led to the recovery of about $6.1 million for 16,000 consumers harmed by illegal practices by auto loan originators. The CFPB’s recent supervisory activities led to or supported five recent public enforcement actions, resulting in over $39 million in consumer remediation and another $19 million in civil money penalties. Today’s report shares information industry can use to comply with federal consumer financial law. In cases where CFPB examiners find problems, they alert the company and outline necessary remedial measures. This may include paying refunds or restitution, or taking actions to stop illegal practices, such as new policies or improved training or monitoring. When appropriate, the CFPB opens investigations for potential enforcement actions. 
Today’s edition of Supervisory Highlights is available at:http://files.consumerfinance.gov/f/documents/201704_cfpb_Supervisory-Highlights_Issue-15.pdf 
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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

CFPB imposes additional fine on Servicemember Auto Lender for violating consent order (pres release re-post)


RELEASED: April 26, 2017 by  CFPB Office of Communications 

CONSUMER FINANCIAL PROTECTION BUREAU ISSUES $1.25 MILLION FINE TO SERVICEMEMBER AUTO LENDER FOR VIOLATING CONSENT ORDER


Auto Loan Company Failed to Provide Redress for Illegal Collection Tactics


Washington, D.C. — The Consumer Financial Protection Bureau (CFPB) today took action against Security National Automotive Acceptance Company (SNAAC), an auto lender specializing in loans to servicemembers, for violating a Bureau consent order. In 2015, the CFPB ordered SNAAC to pay both redress and a civil penalty for illegal debt collection tactics, including making threats to contact servicemembers’ commanding officers about debts and exaggerating the consequences of not paying. SNAAC violated the 2015 order by failing to provide more than $1 million in refunds and credits, affecting more than 1,000 consumers. Today’s consent order requires SNAAC to make good on the redress it owes to those consumers and pay an additional $1.25 million penalty. 
"This company violated a Bureau order when it failed to get money back to servicemembers it had hounded with illegal debt collection tactics,” said CFPB Director Richard Cordray. "We are making sure this company finally rights its wrongs." 
SNAAC, based in Mason, Ohio, is an auto-finance company that operates in more than two dozen states and specializes in loans to servicemembers, primarily to buy used vehicles. In June 2015, the CFPB sued SNAAC for aggressive collection tactics against consumers who fell behind on their loans. If servicemembers lagged behind on payments, SNAAC’s collectors would threaten to contact—and in many cases did contact—their chain of command about their debts. Also, the company exaggerated the consequences of not paying. For instance, they told some consumers that failure to pay could result in action under the Uniform Code of Military Justice, demotion, discharge, or loss of security clearance. But these consequences were extremely unlikely. The CFPB alleged that SNAAC’s aggressive tactics, which took advantage of servicemembers’ special obligations to remain current on debts, victimized thousands of borrowers. 
In October 2015, a CFPB consent order found that SNAAC had indeed engaged in unfair, deceptive, and abusive acts and practices while collecting on these auto loans. The order required SNAAC to pay $2.275 million in consumer redress through credits and refunds, and a $1 million civil penalty. Consumers with an account balance were to receive credits to their accounts, and consumers with a zero balance were to receive cash refunds. While SNAAC submitted two plans that claimed to provide the full amount of redress ordered, both were designed to underpay such redress. Acting on a tip from a servicemember’s father, the CFPB discovered that SNAAC had issued worthless “credits” to hundreds of consumers and failed to provide proper redress to many more. 
The CFPB is issuing today’s consent order against SNAAC for violating the terms of the 2015 consent order by failing to properly give refunds or credits to affected borrowers. In today’s order, the CFPB found that the company had failed to meet its obligation to pay redress to consumers by:
  • Issuing worthless “credits” to settled-in-full accounts: In purporting to provide redress, SNAAC treated accounts that were settled-in-full as having a positive account balance. Instead of providing refunds to consumers with settled-in-full accounts, SNAAC issued worthless account “credits.” Those consumers received no benefit from such a “credit” because they no longer owed SNAAC money and could not use such a credit toward any new or existing loan. 
  • Issuing worthless “credits” to discharged accounts: SNAAC also issued worthless account “credits” to consumers whose debts had been discharged in bankruptcy, and who no longer owed SNAAC money on their auto loan. SNAAC had no legal claim to any unpaid balance, and these consumers received no benefit from the “credits.” SNAAC had, in fact, already stopped collections on these accounts. 
  • Failing to properly give redress to consumers making payments under settlement agreements:  Some SNAAC consumers were making payments under settlement agreements. But SNAAC based redress on the original, higher account balance in place before it agreed on a settlement with the borrower. As a result, in many instances, SNAAC issued credits that exceeded consumers’ settlement balances, rather than refund any amount above what the consumers actually owed. And because their settlement balances were improperly credited, some consumers unwittingly overpaid SNAAC to settle their accounts. 
Enforcement ActionUnder the Dodd-Frank 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. Under today’s consent order: 
  • SNAAC must pay redress as promised to affected consumers: SNAAC must pay the Bureau roughly $720,000, which the Bureau will send as refunds to about 925 consumers. SNAAC must issue about $370,000 in new credits to over 1,000 consumers with remaining account balances as well as properly credit roughly 1,000 consumers making payments under settlement agreements. SNAAC must also pay $75,000 to the Bureau to cover the costs of distributing these payments. 
  • SNAAC must pay a $1.25 million penalty: SNAAC must pay a penalty of $1.25 million to the CFPB Civil Penalty Fund, in addition to the $1 million penalty it paid under the 2015 consent order. 
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The Consumer Financial Protection Bureau is 

Wednesday, February 8, 2017

CFPB releases summary of consumer complaints, total tally now above 1 million


CFPB RELEASE DATE: February 8, 2017

CONSUMER FINANCIAL PROTECTION BUREAU MONTHLY SNAPSHOT SPOTLIGHTS MORTGAGE COMPLAINTS


Report Also Looks at Consumer Complaints from Tennessee
WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) released a monthly complaint snapshot highlighting consumer complaints about mortgages. The snapshot shows that consumers continue to report experiencing problems with mortgage servicers. This month’s report also highlights trends seen in complaints coming from Tennessee. As of Jan. 1, 2017, the Bureau handled approximately 1,080,700 consumer complaints across all products nationwide.  
“Today’s snapshot shows that consumers continue to report running into issues when making payments on their mortgages or when trying to overcome obstacles to keep themselves in their homes,” said CFPB Director Richard Cordray. “The Bureau will continue to work to ensure that mortgage servicers give consumers the timely and effective assistance they deserve.” 
Category Spotlight: MortgagesWith a value of over $10 trillion, the U.S. mortgage market is the largest consumer financial market in the world. Over the past three years, the Bureau has created new protections for consumers such as requiring lenders to determine that consumers can afford to repay their mortgages. The Bureau has also introduced new consumer-friendly forms to help people shop for mortgages and avoid unexpected issues at the closing table. As of Jan. 1, 2017, the Bureau handled approximately 260,500 mortgage-related complaints. Some of the findings in the snapshot include: 
  • Consumers continue to report problems with mortgage servicing: More than 80 percent of mortgage-related complaints submitted to the Bureau had to do with issues consumers report running into when they were making payments, or when they were unable to pay their mortgage. 
  • Consumers complain about funds being misapplied: Consumers complained that when they paid for identified shortages in their escrow accounts, the money they paid was not applied accurately and resulted in an increase in their monthly payments. Additionally, consumers complained that electronic monthly mortgage payments made via bill pay services through their financial institutions were not properly credited to their loan accounts.   
  • Consumers report issues dealing with servicers when trying to resolve loan problems: A frequent mortgage-related complaint from consumers had to do with problems dealing with their servicer when trying to negotiate foreclosure-relief assistance on their loans. Consumers stated that servicers were slow to respond, made repeated requests for already submitted documents, and provided ambiguous denial reasons. 
  • Companies with the most mortgage-related complaints: The three companies that the Bureau has received the most average monthly complaints about were Wells Fargo, Bank of America, and Ocwen. 
National Complaint OverviewThrough Jan. 1, 2017, the CFPB has handled approximately 1,080,700 complaints nationally. Some of the findings from the statistics being published in this month’s snapshot report include: 
  • Complaint volume: For December 2016, debt collection was the most-complained-about financial product or service. Of the approximately 23,000 complaints handled in December, there were 7,196 complaints about debt collection. The second most-complained-about consumer product was credit reporting, which accounted for 3,837 complaints. The third most-complained-about financial product or service was mortgages, accounting for 3,762 complaints. 
  • State information: Alaska, Georgia, and Louisiana experienced the greatest year-to-year complaint volume increases from October to December 2016 versus the same time period 12 months before; with Alaska up 57 percent, Georgia up 46 percent, and Louisiana up 32 percent. 
  • Most-complained-about companies: The top three companies that received the most complaints from August through October 2016 were Equifax, Wells Fargo, and TransUnion. 
Geographic Spotlight: TennesseeThis month, the CFPB highlighted complaints from Tennessee. As of Jan. 1, 2017, consumers in Tennessee submitted 17,800 of the 1,080,700 complaints the CFPB handled. Of those complaints, 4,700 and 5,800 have come from consumers in the Memphis and Nashville metro areas respectively. Findings from the Tennessee complaints include: 
  • Debt collection is the most-complained-about product or service: Consumers in Tennessee most often submitted complaints about debt collection. Debt collection complaints accounted for 34 percent of the complaints submitted to the Bureau by consumers from Tennessee, while nationally debt collection complaints account for 27 percent of complaints.   
  • Rate of mortgage-related complaints lower than the national average: Complaints related to mortgages accounted for 19 percent of all complaints submitted by consumers from Tennessee. This is lower than the rate of 24 percent at which consumers nationally submit mortgage complaints to the Bureau. 
  • Most-complained-about companies: Equifax, Experian, and TransUnion, were the most-complained-about companies for consumers in Tennessee. 
The Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the CFPB, established consumer complaint handling as an integral part of the CFPB’s work. The CFPB began accepting complaints as soon as it opened its doors in July 2011. It currently accepts complaints on many consumer financial products, including credit cards, mortgages, bank accounts and services, student loans, vehicle and other consumer loans, credit reporting, money transfers, debt collection, and payday loans. 
In June 2012, the CFPB launched its Consumer Complaint Database, which is the nation’s largest public collection of consumer financial complaints. When consumers submit a complaint they have the option to share publicly their explanation of what happened. For more individual-level complaint data and to read consumers' experiences, visit the Consumer Complaint Database at: www.consumerfinance.gov/complaintdatabase/ 
Company-level complaint data in the report uses a three-month rolling average of complaints sent by the Bureau to companies for response. This data lags other complaint data in this report by two months to reflect the 60 days companies have to respond to complaints, confirming a commercial relationship with the consumer. Company-level information should be considered in the context of company size. 
To submit a complaint, consumers can:
  • Go online at www.consumerfinance.gov/complaint/
  • Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
  • Fax the CFPB at 1-855-237-2392
  • Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
  • Additionally, through “Ask CFPB,” consumers can get clear, unbiased answers to their questions at consumerfinance.gov/askcfpb or by calling 1-855-411-CFPB (2372). 
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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

CFPB sues debt relief attorneys (press release repost)

CFPB RELEASE DATE: January 30, 2017

CONSUMER FINANCIAL PROTECTION BUREAU SUES DEBT RELIEF ATTORNEYS FOR COLLECTING ILLEGAL FEES FROM STRUGGLING CONSUMERS


Lawyers Revived an Illegal Debt Relief Scheme that the CFPB Previously Shut Down
Washington, D.C. – The Consumer Financial Protection Bureau today took action against a ring of law firms and attorneys who collaborated to charge illegal fees to consumers seeking debt relief. In a complaint filed in federal court, the CFPB alleges that Howard Law, P.C., the Williamson Law Firm, LLC, and Williamson & Howard, LLP, as well as attorneys Vincent Howard and Lawrence Williamson, ran this debt relief operation along with Morgan Drexen, Inc., which shut down in 2015 following the CFPB’s lawsuit against that company. The CFPB seeks to stop the defendants’ unlawful scheme, obtain relief for harmed consumers, and impose penalties. 
“The defendants exploited consumers who were already suffering financial difficulties by tricking them into paying steep, illegal fees,” said CFPB Director Richard Cordray. “We put a stop to this scam once already, and we intend to do it again.” 
Howard Law and Williamson & Howard are law firms based in Orange County, Calif. The Williamson Law Firm is registered in Kansas. Vincent Howard is the president of Howard Law, and Lawrence Williamson heads the Williamson Law Firm. Both are part owners of Williamson & Howard. These firms and lawyers offer debt relief services to consumers nationwide. 
The Telemarketing Sales Rule generally prohibits debt relief providers from charging a fee until they have actually settled, reduced, or changed the terms of at least one of the consumer’s debts. It also limits the types of fees a debt relief provider can charge for already settled debts. Under this rule, consumers facing financial difficulties should not pay any fees for debt relief until they receive the services they signed up for. 
The CFPB’s complaint alleges that the defendants violated the Telemarketing Sales Rule by collecting illegal fees and deceiving consumers about being charged upfront fees. Consumers seeking debt relief help from the attorneys in this case were given two contracts, one for debt settlement services and the other for bankruptcy-related services. The CFPB alleges that consumers who signed up sought services only for debt relief and not bankruptcy. The contract given to consumers related to bankruptcy was a ruse to disguise illegal upfront fees. The CFPB alleges that the attorneys collected tens of millions of dollars in unlawful fees this way from consumers, and often failed to settle any debts. 
The defendants also assisted illegal debt relief practices by Morgan Drexen, Inc. and its president and chief executive officer, Walter Ledda. In 2015, the CFPB secured a judgment against Ledda for participating in the unlawful debt relief operation. In 2016, the CFPB secured a judgment against Morgan Drexen for the same conduct. The attorneys named in today’s case had worked alongside Morgan Drexen and Ledda to collect illegal fees, and then took over the operation after the CFPB halted Morgan Drexen’s and Ledda’s illegal activities. 
The CFPB’s complaint is not a finding or ruling that the defendants have actually violated the law. 
The CFPB’s complaint can be found here:
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Wednesday, January 25, 2017

CITI (Citibank) subsidiaries CitiFinancial Servicing and CitiMortgage, Inc. to pay 28.8 mil for giving runaround to borrowers trying to save their homes (CFPB release re-post)

January 23, 2017
CONTACT:Office of CommunicationsTel: (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 ServicingCitiFinancial 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 
CitiMortgageCitiMortgage 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 
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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

Sunday, October 2, 2016

CFPB issues updated examination procedures under Military Lending Act and July 2015 DOD Rule (re-post)


CONSUMER FINANCIAL PROTECTION BUREAU RELEASES UPDATED EXAM PROCEDURES FOR MILITARY LENDING ACT
CFPB to Evaluate Military Lending Act Violations in its Exams of Creditors and Will Use Its Enforcement Authority in Cases of Substantial Consumer Harm
FOR IMMEDIATE RELEASE:September 30, 2016
CONTACT:Office of CommunicationsTel: (202) 435-7170
WASHINGTON, D.C. – Today the Consumer Financial Protection Bureau (CFPB) issued the procedures its examiners will use in identifying consumer harm and risks related to the Military Lending Act rule which was updated in July 2015. The exam procedures being released today by the Bureau provide guidance to industry on what the CFPB will be looking for during reviews covering the amended regulation.
“Protecting servicemembers is a priority for the CFPB,” said CFPB Director Richard Cordray.“The updated exam procedures being released today will help ensure that servicemembers and their families are dealt with in a fair and safe manner when attempting to access credit.”
In 2006, Congress passed the Military Lending Act to help address the problem of high-cost credit as a threat to military personnel and readiness. In July 2015, the Department of Defense issued a final rule expanding the types of credit products that are covered under the protections of the Military Lending Act. The protections provided by the Military Lending Act extend to active-duty servicemembers (including those on active Guard or active Reserve duty) and covered dependents. When lending to servicemembers and their dependents creditors must abide by the following requirements:
  • A 36 percent rate cap: Creditors cannot charge servicemembers or their covered dependents more than a 36 percent Military Annual Percentage Rate, which generally includes the following costs (with some exceptions): finance charges, credit insurance premiums or fees, add-on products sold in connection with the credit extended, and other fees such as application or participation fees.
  • No mandatory waivers of consumer protection laws: Creditors cannot require servicemembers or their covered dependents to submit to mandatory arbitration or give up certain rights under state or federal law, such as the Servicemembers Civil Relief Act.
  • No mandatory allotments: Creditors cannot require servicemembers or their covered dependents to create a voluntary military allotment in order to qualify for a loan.
Early examinations will evaluate financial institutions’ compliance management systems and overall efforts to follow the rule’s requirements. Specifically, examiners will consider an institution’s implementation plan, including actions taken to update policies, procedures, and processes; its training of appropriate staff; and its handling of early implementation challenges.The Bureau also expects institutions to ensure servicemembers and other eligible consumers are receiving the consumer protections afforded by the Military Lending Act. Risks to consumers resulting from Military Lending Act violations are significant, and the CFPB will exercise its enforcement authority in appropriate cases of substantial consumer harm.
For most forms of credit subject to the updated Military Lending Act rule, creditors are required to comply with the amended regulation as of Oct. 3, 2016; credit card providers must comply with the new rule as of Oct. 3, 2017.
The revised Military Lending Act exam procedures released today are based on the approved Federal Financial Institutions Examination Council procedures. This interagency effort helps promote a consistent regulatory experience for industry.
Today’s revised Military Lending Act Exam Procedures can be found at:http://files.consumerfinance.gov/f/documents/092016_cfpb_MLAExamManualUpdate.pdf
A copy of the Department of Defense’s Military Lending Act rule can be found here:https://www.gpo.gov/fdsys/pkg/FR-2015-07-22/pdf/2015-17480.pdf
Information for consumers about the Military Lending Act is available here on AskCFPB:http://www.consumerfinance.gov/askcfpb/
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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.