Thursday, June 18, 2015

CFPB Enforcement action against medical debt collector (6/18/2015 press release re-post)


Company Mishandled Consumer Credit Reporting Disputes, Prevented Consumers From Exercising Debt Collection Rights 
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against a medical debt collection company for mishandling consumer credit reporting disputes and preventing consumers from exercising important debt collection rights. These practices potentially affected the credit scores of thousands of individuals and caused consumers distress and confusion. The CFPB is ordering the company to provide over $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty. 
“Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said CFPB Director Richard Cordray. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze. Today we are putting a stop to these illegal practices and getting consumers the relief they deserve.” 
Syndicated Office Systems, LLC, which does business as Central Financial Control, is a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors, and other healthcare providers. The company is an indirect subsidiary of Conifer Health Solutions, LLC, which provides billing and other services to more than 600 hospitals nationwide. Tenet Healthcare Corporation, a publicly traded healthcare services company based in Dallas, Texas, is the parent company of Conifer Health Solutions. 
Companies that collect medical debt and supply this information to credit reporting agencies have a significant impact on consumers’ credit scores. More than 43 million Americans have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt. A recent CFPB report found that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers. The Bureau also found that medical debt can overly penalize consumer credit scores. 
As part of its debt collection business, Syndicated Office Systems regularly supplies information on the status of its medical debt collection accounts to credit reporting agencies and is considered a furnisher under the Fair Credit Reporting Act. Credit reporting agencies track a consumer’s credit history and other consumer transactions based on information supplied by furnishers. The reports that credit reporting agencies sell are used in determining everything from consumer eligibility for credit to employment decisions.  
Syndicated Office Systems typically initiates collection efforts through letters and telephone calls to consumers. Within five days of their initial communication, debt collectors are generally required to send debt validation notices to alert consumers about their right to request proof that a debt is valid or dispute the debt. A CFPB investigation, however, uncovered that Syndicated Office Systems failed to send debt validation notices to thousands of consumers. 
The CFPB also found that the company mishandled consumer credit reporting disputes by failing to investigate and respond to consumers within the 30-day timeframe required under the law.  Because the company furnishes information related to past-due medical debt, the information consumers seek to dispute or validate has the potential to lower credit scores. 
The CFPB order charges the company with violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The violations specifically include: 
  • Mishandling consumer credit reporting disputes:  Syndicated Office Systems failed to respond to more than 13,000 consumer credit report disputes within the 30-day timeframe required by law. On average, the company took more than 90 days to respond to consumers’ disputes and, in some cases, took over a year. Consumers spent time and money attempting to follow up on unresolved disputes and experienced distress and confusion due to the delays. The CFPB found that the company had no policies or procedures in place to investigate these consumer credit report disputes. Instead, the company treated consumer credit report disputes in the same way as other consumer complaints and had no deadline for responding. 
  • Preventing consumers from exercising important debt collection rights: Syndicated Office Systems failed to send debt validation notices to more than 10,000 consumers. During this time, the company continued to collect over $2 million from consumers who did not receive the notices. Failing to provide notices denies consumers the opportunity to assess whether the debt is valid and whether the amount or source is correct. These notices can be an especially important consumer safeguard with regard to medical debt, where issues like insurance reimbursements and medical billing processes are commonly fraught with complexity, confusion, and delay, and can lead to consumers being unsure of how much to pay or even whom to pay. 
Together, these violations had the potential to harm thousands of consumers and in some cases, negatively impact their credit scores. This can hinder consumers’ ability to obtain credit or increase the rates they may pay for credit. In some cases, the company reported inaccurate information to the credit reporting agencies and then failed to provide a timely response to consumer disputes about the errors. Some consumers may also have been able to avoid negative information on their credit reports if they had known about their right to assess and dispute the debt in question. 
Enforcement ActionTo address these violations, the CFPB order requires Syndicated Office Systems to take the following actions: 
  • Provide over $5 million in relief to harmed consumers: Syndicated Office Systems must identify all affected consumers and provide monetary relief. Consumers who were never sent a debt validation notice and who made payments to the company will receive a full refund and have remaining account balances forgiven. The company will pay $100 to consumers who were never sent a debt validation notice and did not make any payments to the company. The company must also pay damages ranging from $100-$1,000 to each consumer who did not receive a timely response to his or her credit report dispute. The amount that each consumer receives will correspond to the duration of the company’s delay in responding to the consumer’s credit report dispute. The company must submit a written plan to the CFPB for approval detailing how the company will identify affected consumers and provide relief. 
  • Correct errors on credit reports: Syndicated Office Systems must identify all consumer accounts affected by its illegal business practices and fix any inaccuracies. The company must also update the account information it has furnished to the credit reporting companies and notify all affected consumers of this update, to the extent it has not already done so. 
  • End illegal credit reporting and debt collection practices: The company must cease its illegal business practices and develop new policies to comply with federal consumer credit reporting and debt collection laws. 
  • Establish consumer safeguards: Syndicated Office Systems must change how it does business and establish safeguards to ensure it has the staffing, facilities, systems, and information necessary to timely and completely respond to consumer credit report disputes. It must also establish a strong oversight program to identify any systemic inaccuracies to ensure that it informs consumers of their right to validate and dispute inaccurate debts in collection. 
  • Pay a civil monetary penalty of $500,000: Syndicated Office Systems will pay a $500,000 fine for the illegal actions. 
The consent order filed today is available here: 
The CFPB will continue to enforce federal laws to ensure accuracy in credit reporting and debt collection. Consumers should check their credit report for inaccuracies at least once a year. Consumers can order a free credit report once every 12 months from 
Tips for consumers on how to deal with medical debt can be found at: 

Wednesday, June 17, 2015

CFPB Takes Action Against Servicemember Auto Lender for Aggressive Debt Collection Tactics‏ (press release re-post)


Auto Loan Company Misled Servicemembers About Consequences of Nonpayment
WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) sued an auto loan company, Security National Automotive Acceptance Company, for aggressive debt collection tactics against servicemembers. In a complaint filed in federal court, the CFPB alleges that the company used a combination of illegal threats and deceptive claims in order to collect debts. The CFPB is seeking compensation for harmed consumers, a civil penalty, and an order prohibiting the company from committing future violations.
“Security National Automotive Acceptance Company took advantage of military rules to put enormous pressures on servicemembers to pay their debts,” said CFPB Director Richard Cordray. “For all the security they provide us, servicemembers should not have their financial and career security threatened by false information from an auto loan company.”
Security National Automotive Acceptance Company, LLC (SNAAC) is an Ohio-based auto finance company that operates in more than two dozen states and specializes in lending to servicemembers. It lends money primarily to active-duty and former military to buy used motor vehicles.
The CFPB alleges that the company violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, and abusive acts and practices by using aggressive collection tactics that took advantage of servicemembers’ special obligations to remain current on debts. Both active-duty and former servicemembers could encounter trouble with the company if they missed or were late on payments. Once consumers defaulted, they became subject to repeated threats to contact their chain of command. In many other instances, the company exaggerated the consequences of not paying. Thousands of people were victims of the company’s aggressive tactics. Specifically, the CFPB alleges that the company has:
  • Exaggerated potential disciplinary action that servicemembers would face:The CFPB believes that the company routinely exaggerated the potential impacts on servicemembers’ careers of remaining delinquent. The company told customers that their failure to pay could result in action under the Uniform Code of Military Justice, as well as a number of other adverse career consequences, including demotion, loss of promotion, discharge, denial of re-enlistment, loss of security clearance, or reassignment. In fact, these consequences were extremely unlikely.
  • Contacted and threatened to contact commanding officers to pressure servicemembers into repayment: The company buried a provision within the fine print of contracts saying that it could contact commanding officers about servicemembers’ debts. The company would repeatedly contact commanding officers to disclose the debts in an effort to force payment, and suggest that the servicemembers were in violation of military law and other regulations. The CFPB alleges that many consumers were unaware of the provision, and those who were aware of it did not understand the pressure that would be brought to bear on them because of it. The company’s tactics, the CFPB alleges, therefore took advantage of the servicemembers’ inability to protect their interests in their transactions with the company and was unfair.
  • Falsely threatened to garnish servicemembers’ wages: The company implied to consumers that it could immediately commence an involuntary allotment or wage garnishment. But such consequences could not or would not occur because, through the military pay system, involuntary allotments are only processed once a judgment by a court is obtained. The company would threaten to pursue an involuntary allotment before they had even determined whether the servicemember would be sued.
  • Misled servicemembers about imminent legal action: In many instances, the company threatened to take legal action against customers when, in fact, it had not determined whether to take such action. In fact, in numerous instances, the company did not intend to take such action at the time.
Through this lawsuit, the Bureau seeks to stop the alleged unlawful practices of the company. 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 company has actually violated the law.

Wednesday, June 10, 2015

Leading motor vehicle financing companies that are not banks to come under CFPB supervision: Final Rule pulished

CFPB adopts final rule to assure that consumers purchasing or leasing automobiles are treated fairly by the largest players in the market for auto financing that are not banks.

The CFPB already supervises motor vehicle financing by large banks and credit unions. The new rule expands the scope of regulation to bring in the nonbank auto finance companies with a volume of at least 10,000 transactions a year. The definition of "larger participants" covers about 90% of the total market segment, and involves close to 7 million consumers. Auto finance is the third-largest category of household debt after home mortgages and student loans, with about $900 billion of debt outstanding in 2014.

Through its examiners the Bureau will monitor these major players in car financing for compliance with federal law in such areas as accurate disclosure of credit terms in marketing (deceptive practices), fair lending under the Equal Credit Opportunity Act, payment history reporting to credit bureaus, debt collection activities, and repossession of vehicles by third parties hired by the creditors.

The new rule, which was originally proposed in Sept. 2014 and modified in minor ways, will go into effect 60 days from the date of publication in the Federal Register.


Bureau Publishes Exam Procedures for Supervised Companies in $900 Billion Market

Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) published a rule today that will allow the agency to supervise larger nonbank auto finance companies for the first time. The CFPB also released the examination procedures that examiners will use to ensure that auto finance companies are following the law. 
“Auto loans and leases are among the most significant and complex financial transactions in a typical consumer’s life,” said CFPB Director Richard Cordray. “Today’s rule will help ensure that larger auto finance companies treat consumers fairly.” 
Auto loans are the third largest category of household debt, behind mortgages and student loans. American consumers had about $900 billion in auto loans outstanding in the fourth quarter of 2014. The automobile leasing market also continues to grow as more than a quarter of new cars are acquired through leases. 
Auto loans are financed by both banks and nonbanks. Consumers can either get a loan through direct financing, where they seek credit directly from a lender, or through indirect financing, where an auto dealer typically enters into a retail installment sales contract that it then sells to a third-party. Banks, credit unions, and nonbank auto finance companies provide credit to consumers both directly and indirectly. Some nonbank finance companies are “captive” nonbanks, meaning they are owned by auto manufacturers and generally do only indirect lending. 
Currently, the Bureau supervises auto financing at the largest banks and credit unions. Today’s rule extends that supervision to any nonbank auto finance company that makes, acquires, or refinances 10,000 or more loans or leases in a year. Under the rule, those companies will be considered “larger participants,” and the Bureau may oversee their activity to ensure they are complying with federal consumer financial laws, including the Equal Credit Opportunity Act, the Truth in Lending Act, the Consumer Leasing Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (Dodd-Frank Act) prohibition on unfair, deceptive, or abusive acts or practices. 
Under today’s final rule, which was proposed in September 2014, the Bureau estimates that it will have authority to supervise about 34 of the largest nonbank auto finance companies and their affiliated companies that engage in auto financing. These companies together originate around 90 percent of nonbank auto loans and leases, and in 2013 provided financing to approximately 6.8 million consumers. The final rule also defines additional automobile leasing activities for coverage by certain consumer protections of the Dodd-Frank Act. 
The Bureau is finalizing the rule largely as proposed, with minor changes. The final rule broadens the category of transactions involving asset-backed securities that are not counted toward the 10,000 transaction threshold. It also makes a minor modification to the definition of refinancing for the purpose of the threshold.  
To coincide with this new authority, the Bureau has also updated its Supervisory and Examination Manual to provide guidance on how the Bureau will monitor the bank and nonbank auto finance companies that it supervises. Examiners will be assessing potential risks to consumers and whether auto finance companies are complying with requirements of federal consumer financial law. Among other things, examiners will be evaluating whether auto finance companies are: 
  • Fairly marketing and disclosing auto financing terms: The Bureau will be examining auto finance companies that market directly to consumers to ensure they are not using deceptive tactics to market loans or leases. The Bureau would be concerned if consumers are being misled about the benefits or terms of financial products. The Bureau is also looking to ensure that consumers understand the terms they are getting. 
  • Providing accurate information to credit bureaus: The Bureau will assess whether information auto finance companies provide to credit bureaus is accurate. The CFPB recently took an enforcement action against an auto finance company that distorted consumer credit records by inaccurately reporting information like the consumers’ payment history and delinquency status to credit bureaus. The CFPB is looking to prevent inaccurate information from being reported in the future. 
  • Treating consumers fairly when collecting debts: The Bureau will assess whether auto finance companies are using illegal debt collection tactics. The Bureau will be looking to ensure that collectors are relying on accurate information and using legal processes when they collect on debts.  The Bureau also will review the repossession process, including the practices of third-party service providers that are employed to repossess autos. 
  • Lending fairly:  The Bureau will assess whether auto finance companies’ practices comply with the Equal Credit Opportunity Act and other Bureau authorities protecting consumers. 
Today’s rule will take effect 60 days after publication in the Federal Register. 
The Examination Procedures for Auto Finance can be found at: