On September 15, the FTC issued a paper summarizing the insights garnered through its October 2015 “Follow the Lead” workshop on lead generation. As previously covered in InfoBytes, the workshop focused on lead generation issues in the mortgage and education lending space. The FTC paper “detail[s] the mechanics of online lead generation and potential benefits and concerns associated with lead generation for both businesses and consumers.” The paper provides a synopsis of payday lenders’ role in the lead generation industry by describing their use of the “ping tree,” an automated process that enables aggregators to sell consumers’ personal information to lenders or other aggregators. Although the paper acknowledges that lead generators provide potential benefits to consumer, including the ability to offer competitive prices in the mortgage lending space, it never-the-less identifies the following key areas of concern: (i) complexity and lack of transparency surrounding industry policies and processes; (ii) the use of potentially aggressive or deceptive marketing techniques; and (iii) the potential misuse and mishandling of consumers’ personal information in the payday lending space.
On September 21, the DOJ and FTC entered into an agreement with the former vice president of a Texas-based debt collection company, to resolve allegations that that he violated Section 5 of the FTC Act and Section 807 of the FDCPA. The stipulated order enters a civil penalty of $496,000, but suspends the majority of the judgment based on certain conditions, including cooperation in the ongoing lawsuit against his former company.
FTC Seeks Additional Comments Regarding Proposed Research on Consumers’ Experience with the Auto Finance Industry
On September 14, the FTC published its second Federal Register notice regarding a proposed consumer survey designed to provide the FTC with insights into consumer understanding of the process whereby automobiles are purchased and financed through a dealer. The FTC issued its first notice regarding the survey on January 7, 2016. The second notice summarizes industry comments received in response to its first notice. Commenters suggested that the survey include questions addressing such topics as, (i) consumers’ experiences specifically with “Buy Here Pay Here” dealers; (ii) “yo yo financing scams”; and (iii) add-on products or services. The second notice outlines the FTC’s planned methodology for conducting the survey, and identifies the areas on which the consumer interview questions will focus. The FTC estimates that 170 consumers will participate in the survey and that it will require approximately 367 burden hours. Comments regarding the accuracy of burden estimates, as well as ways to minimize the information collection burden, are due by October 14, 2016.
On September 8, the FTC announced that, under separate stipulated final orders (here and here), two owners of a debt relief operation are permanently banned from the debt relief business for violations of the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, and the Telemarketing Sales Rule. The FTC’s 2015 complaint alleged that the companies and the owners (collectively, defendants) convinced consumers with payday loan debts to enroll in their “Financial Hardship Program” (Program) by falsely promising to renegotiate the terms of their loans. Consumers were advised to stop making payments to their lenders and pay money to the Program instead, including enrollment and bi-weekly fees. According to the FTC, the defendants “failed to provide the consumers with the promised debt relief, and consumers ended up in deeper financial trouble, having paid hundreds of dollars for no reduction or settlement of their loans.” The stipulated final orders each impose monetary judgments of more than $23.7 million. The judgments will be partially suspended when the individually named owners pay $149,537 and approximately $8,037, respectively. In addition to barring the defendants from the debt relief operation business, the orders further prohibit them from “making representations about financial and other products and services, and from making unsubstantiated claims about any products or services,” and “from profiting from consumers’ personal information and failing to dispose of it properly.”
On September 6, the Community Financial Services Association of America (CFSA) released a 2,000-plus page document containing testimonials submitted to the CFPB regarding consumers’ positive experiences with the payday loan industry. A CFSA representative uncovered the allegedly “buried” stories through a Freedom of Information Act (FOIA) request filed December 31, 2015. According to the CFSA, of the newly discovered 12,546 consumer comments regarding to the payday loan industry, 12,308 “praised the industry and its products and services, or otherwise indicated positive experiences.” Among other things, the CFSA further noted that (i) since the CFPB implemented its consumer complaint portal in 2011, approximately 1.5% of all complaints received related to the payday loan industry; (ii) in an FTC 2015 summary of consumer complaints, the “FTC found that just 0.003% of more than three million complaints related to payday lending”; and (iii) at least two customer surveys reveal that payday loan borrowers are overwhelmingly satisfied with the product. Regarding the CFPB’s proposed rules to address the short-term lending industry, CFSA CEO Dennis Shaul commented, “[i]t is clear that millions of consumers are satisfied with the payday loan product and services, and do not want the federal government to take this valued credit option away from them.”