On April 21, the CFPB and the FTC announced a joint enforcement action against a national mortgage servicing company, ordering the company to pay roughly $63 million in relief and penalties for allegedly mishandling home loans for borrowers who were trying to avoid foreclosure. Both regulators allege that from 2010 to 2014, the servicing company failed to honor modifications made to loans it acquired from other firms. According to the complaint, the company allegedly insisted that homeowners make the higher monthly payments and also make payments before providing loss mitigation options. Moreover, the CFPB and FTC claim the company illegally harassed borrowers who fell behind, made false threats, and revealed debts to the borrowers’ employers. The servicing company will pay $48 million in relief to eligible homeowners and a $15 million civil money penalty to the CFPB.
FTC Lobbies Michigan Legislature to Repeal Ban On Direct-to-Consumer Sale of Motor Vehicles by Auto Manufacturers
On May 11, the FTC released a statement regarding the agency staff’s May 7 letter to Michigan Senator Booher, which concerns pending SB 268 – an act to regulate the sale and servicing of automobiles. The proposed legislation seeks to create an “exception to current law that prohibits automobile manufacturers from selling new vehicles directly to consumers.” While the letter states that the bill likely will encourage competition and benefit consumers, the staff’s view is that the legislation’s scope is too narrow and “would largely perpetuate the current law’s protectionism for independent franchised dealers, to the detriment of Michigan car buyers.” The focal point of the FTC staff’s letter is that, “absent some legitimate public purpose, consumers would be better served if the choice of distribution method were left to motor vehicle manufacturers and the consumers to whom they sell their products.”
On April 13, the FTC announced that two debt brokers agreed to settle two separate cases filed last year involving the leaking of over 55,000 consumers’ personal information. The brokers allegedly shared consumers’ personal information online – including credit card numbers, names, addresses, and bank account numbers – via unencrypted documents. Although the information was geared towards members of the debt collection industry, it was available to anyone with an internet connection. According to the FTC, the publicly available information put consumers at risk of identity theft and/or phantom debt collection. Under the terms of both proposed settlement agreements (Orders), the brokers would be required to: (i) implement and effectively maintain security programs that will protect consumers’ information; and (ii) have their respective security programs examined initially by a certified third party and again, thereafter, every two years for a duration of 20 years after service of the Orders. The FTC unanimously approved the proposed Orders and has filed them in the U.S. District Court for the District of Columbia for final court approval.
On April 15, the FTC released its 2014 Annual Highlights Report (Report), summarizing the FTC’s work during the prior year to protect consumers and promote competition in industries such as mobile technology, healthcare, and consumer products and services. The Report notes a range of policy actions, including filing eight amicus briefs on topics such as debt collection and children’s online privacy. It also publicizes the FTC’s work in pursuing over 150 enforcement actions resulting in $640 million in consumer refunds, highlighting the actions against mobile carriers’ “cramming” activities and companies that misrepresented the security features of their mobile applications and failed to disclose hidden in-app charges.
On April 7, the FTC announced a proposed settlement of an administrative complaint alleging that a web hosting provider violated the Federal Trade Commission Act. According to the press release, the company offered web hosting packages to consumers with the guarantee of receiving their money back if they canceled within 30 days. The company allegedly did not adequately disclose that customers who had purchased a new annual or multi-year web hosting package and registered an included domain name would receive only a partial refund if they canceled within 30 days. The proposed settlement prohibits the company from misleading consumers about its cancellation and refund policies.
On March 23, the FTC announced – via blog post – the formation of the Office of Technology Research and Investigation (OTRI), a newly formed research office within its Bureau of Consumer Protection. The OTRI succeeds the Mobile Technology Unit and will have an enhanced mission within the FTC to investigate technology issues encompassing privacy, data security, automobiles, smart phones, smart homes, emerging payment methods, Internet of Things, and big data.
On March 26, the FTC announced the results of Operation Ruse Control, “a nationwide and cross-border crackdown” on the auto industry with the intent to protect consumers who are purchasing or leasing a car. Efforts taken jointly by the FTC and its law enforcement partners resulted in over 250 enforcement actions, including the six most recent cases that involved (i) fraudulent add-ons; (ii) deceptive advertising; and (iii) auto loan modification. According to the press release, the FTC recently took its first actions against two auto dealers for its add-on practices, which allegedly violate the FTC Act by failing to disclose the significant fees associated with offered programs or services and misrepresenting to consumers that they would save money. Three auto dealers recently “agreed to settle charges that they ran deceptive ads that violated the FTC Act, and also violated the Truth in Lending Act (TILA) and/or Consumer Leasing Act (CLA).” Finally, at the FTC’s request, the U.S. District Court for the Southern District of Florida temporarily put an end to the practices of a company that charged consumers an upfront fee to “negotiate an auto loan modification on their behalf, but then often provided nothing in return.” The FTC’s recent actions are indicative of its ongoing efforts to prevent alleged fraud within the industry.
On March 5, the U.S. District Court for the Western District of Texas approved a settlement agreement between the FTC and a Texas-based mortgage relief company and its owners (Defendants) to resolve allegations that they charged customers up-front fees for services that were promised to reduce their mortgage interest rates or monthly payments. According to the complaint filed last year, the FTC alleged that the Defendants (i) misled consumers into believing that they would obtain mortgage loan modifications or help consumers avoid foreclosure; (ii) deceived consumers by instructing them to stop payment of their mortgages so that they could afford Defendants’ fees without disclosing that if they did so, consumers “could lose their homes or damage their credit ratings;” and (iii) failed to make required disclosures and illegally charged an upfront fee of, on average, $2,550. Among other requirements, the Order (i) requires the Defendants to pay more than $1.2 million in “equitable monetary relief,” and (ii) prohibits the Defendants from advertising, marketing, promoting or selling debt relief products or services. However, based on an assessment of the Defendants’ financial statements, the judgment will be partially suspended after the FTC receives approximately $68,000.
On March 12, the FTC announced its coordination with the CFPB to reauthorize for a three-year term their memorandum of understanding (MOU), which outlines the two agencies’ coordination under the Consumer Financial Protection Act. The interagency agreement outlines processes for, among other things, coordinated law enforcement activities, commencement of or settling investigations and actions and proceedings, intervention in law enforcement actions, consultation on rulemaking and guidelines, sharing supervisory information, sharing consumer complaint information, and coordination to minimize duplicative or burdensome oversight or administrative proceedings.
On February 26, the FTC and the New York State Attorney General announced joint lawsuits to cease certain practices of two debt collection operations based in upstate New York. The complaints allege that the defendants unlawfully used threats and abusive language, including false threats that consumers would be arrested, to collect more than $45 million in supposed debts. The FTC and the State of New York are also seeking monetary relief to provide refunds to consumers. FTC v. 4 Star Resolution LLC, No. 1:15-cv-00112-WMS (W.D.N.Y. Feb. 9, 2015), FTC v. Vantage Point Services, LLC, No. 1:15-cv-00006-WMS (W.D.N.Y. Jan. 5, 2015). The District Court has temporarily enjoined the defendants’ practices in both cases.
On January 28, the FTC released a comprehensive report detailing what the so-called “Internet of Things” is, how it is being used, and how both consumers and businesses can protect themselves. The report defines the Internet of Things as “devices or sensors – other than computers, smartphones, or tablets – that connect, store or transmit information with or between each other via the Internet,” and that are sold to or used by consumers. The report focuses on consumer privacy and security and offers a variety of recommendations for those companies offering devices that fall within the definition, including that security be a key part of the design process and data collection be limited where possible. The report does not call for new legislation specific to the Internet of Things because the FTC believes such legislation would be premature. The FTC states that it will use existing authority under laws such as the FTC Act, the Fair Credit Reporting Act, the Hi-Tech Act, and the Children’s Online Privacy Protection Act to take actions against Internet of Things products and services as necessary to protect consumers.
On December 4, the CFPB fined a New Jersey-based debt-settlement service provider $69,075 in civil monetary penalties for alleged violations of the FTC’s Telemarketing Sales Rule (TSR). The CFPB alleged that the firm charged upfront fees to consumers which are prohibited for debt-settlement services. Further, the CFPB charged that the firm failed to provide debt-settlement services to consumers which harmed their credit history. In addition to the civil money penalty, the consent order requires the firm submit a compliance plan that includes (i) written policies and procedures designed to prevent violations of the TSR; (ii) training programs addressing the TSR and Federal consumer financial laws; (iii) written compliance monitoring processes; (iv) consumer complaint monitoring process; and (v) specific deadlines for when the compliance plan will be completed.
On November 19, the DOJ issued a press release announcing charges against six employees of a Georgia-based debt collection company for allegedly running a $4.1 million dollar debt collection scam. According to the press release, from approximately 2009 to May 2014, the accused employees allegedly falsely represented themselves as affiliated with various law enforcement agencies, and made a variety of false statements to consumers in an attempt to coerce them into making payments to the debt collection company. The action appears to be the first case in which multiple federal agencies – U.S. Attorneys’ Office, CFPB, FBI, and the FTC – have taken a coordinated action against a debt collector. The complaint was filed in the Southern District of New York.
On October 23, the CFPB and the FTC will hold a roundtable to discuss the effects of debt collection and credit reporting in the Latino community. The event will focus on the customers with limited English proficiency, and is scheduled to take place from 9 a.m. to 5 p.m. in Long Beach, CA.
On October 8, the FCC announced a $105 million settlement – the largest in the agency’s history – with a mobile telephone company to resolve allegations that the company engaged in unauthorized billing practices. According to the FCC, the company charged customers for third-party services, such as subscriptions for ringtones, wallpapers, and certain premium text messages, for which they did not sign up. Many customers contested the charges, only to discover that the company either refused to issue refunds or refunded them for only one or two months. Under the terms of the settlement, which the FCC negotiated with the FTC and the attorney generals of the 50 states and the District of Columbia, the company must pay $80 million to the current and former customers affected by its billing practices, $20 million to the state governments involved in the settlement, and $5 million to the U.S. Treasury.