The CFPB and the attorneys general of North Carolina and Virginia brought an enforcement action against three related firms last week, alleging they used illegal debt collection practices against U.S. military service members. Freedom Stores (also known as Freedom Furniture and Electronics) is a Virginia-based retailer that caters to U.S. military members with stores located near military bases nationwide. Freedom Stores offers credit to consumers purchasing its merchandise and transfers the contracts to an affiliated company, Freedom Acceptance Corp. Owners and top executives John Melley and Leonard Melley Jr. also own Military Credit Services, which provides financing for purchases made at over 300 independent consumer-goods retailers, primarily catering to service members. The CFPB and the states filed a proposed consent ...

In another example of multi-agency, multi-jurisdictional legal action, the CFPB and Florida’s Attorney General Office brought an enforcement against two student debt-relief companies accused of tricking borrowers into paying upfront fees for federal loan benefits. “We allege that both companies exploited vulnerable student loan borrowers, made false promises about their debt-relief services, and charged illegal upfront fees,” said CFPB Student Loan Ombudsman Rohit Chopra. The bureau and the Florida AG shut down Tampa-based student loan debt-relief company College Education Services, and its owners, Marcia Elena Vargas and Frank Liz, for allegedly scamming students into paying upfront fees for student loan debt consolidation, loan forgiveness, and relief from garnishments, services that were never provided or not performed as promised, according to ...

The CFPB sued a Dallas-based company, Union Workers Credit Services, for allegedly deceiving consumers into paying fees to sign up for what it advertises to be a general-use credit card that actually can only be used to buy products from the company. “The business model for Union Workers Credit Services is built on duping consumers into signing up for a sham credit card,” said CFPB Director Richard Cordray. “Hundreds of thousands of people, including a great many union members who were specially targeted, have been tricked into spending millions of dollars for a so-called credit card that can really only be used to buy the company’s own products, ” he added. “From the misleading photos of nurses and firemen on ...

In response to growing concern over medical debt collection and reporting, the CFPB announced at a recent public field hearing that it will require major credit reporting companies to provide regular accuracy reports as part of ongoing examinations. The reports are to highlight key risk areas for consumers, such as disputes filed with the credit reporting agencies. Some of the metrics in the accuracy report are to include: Furnishers with the most overall disputes: If a credit reporting company continuously experiences a disproportionately large number of consumer disputes about information from a particular furnisher, the CFPB said it expects the credit reporting agency to investigate, identify if there is a problem, and take appropriate action. Industries with the most disputes: ...

Consumer complaints to the CFPB about credit reporting-related issues fell 10 percent industrywide during the third quarter of the year, but leapt more than 100 percent on a year-over-year basis, according to an analysis of the bureau’s complaint database by Inside the CFPB. Drawing definitive conclusions on the data may be premature, given that the bureau has only been collecting complaints about credit reporting since the fourth quarter of 2012. However, a close look at the available data suggests a seasonal jump in consumer grievances takes place in the first quarter of the year. For example, in the first quarter of 2013, gripes jumped 63.7 percent. Similarly, in the first quarter of 2014, complaints leaped 101.5 percent [with exclusive chart] ...

The CFPB’s proposed rule, “Defining Larger Participants in the Automobile Financing Market,” didn’t win many friends in the auto finance sector during the public comment period which closed earlier this month. The proposed rule would generally allow the bureau to supervise larger nonbank auto finance companies – those that make, acquire or refinance 10,000 or more loans or leases in a year – for the first time at the federal level. The bureau also indicated that it considered, and is continuing to consider, the establishment of a higher threshold – 50,000 annual originations, and one that is lower – 5,000 annual originations.The National Independent Automobile Dealers Association told the CFPB it should decline to establish any threshold that is lower than the 10,000 ...

Different segments of the financial services industry are split on the CFPB’s proposal to implement a limited “no-action letter” policy to reduce the regulatory uncertainty that may exist for certain emerging products or services which stand to benefit consumers. The proposed policy would allow bureau staff to send a no-action letter to a company informing it that the CFPB isn’t planning to recommend initiation of supervisory or enforcement action in connection with a firm’s offering or provision of a new product. As innocuous as that sounds, at least one firm, International Bancshares Corp. of Laredo, TX, said it had serious concerns with the bureau’s proposal, which the company characterized as very narrow.Among the company’s complaints is that the bureau’s ...

Many mortgage lenders are going to feel they are “damned if they do, damned if they don’t,” when they learn about the fair lending pitfalls inadvertently lurking in the weeds of compliance with the CFPB’s Truth in Lending Act and Real Estate Settlement Procedures Act integrated disclosure rule and the forthcoming Home Mortgage Disclosure Act rule. “Looking ahead to next year and beyond, the TILA-RESPA integrated disclosure rule could bring additional new risk,” said Colgate Selden, counsel with the Alston & Bird law firm, during a recent webinar on fair lending risk sponsored by Inside Mortgage Finance, an affiliated newsletter. “Some of these are old risks that may have gone away, but are back in some ways,” Selden told attendees. ...

Supervision & Enforcement to Exceed Half of CFPB Staff. The staffing level in the supervision, enforcement and fair lending division of the Consumer Financial Protection Bureau is projected to rise to just over half – 51.4 percent – of bureau personnel for fiscal year 2015, which began Oct. 1, 2014, and ends Sept. 30, 2015. SEFL staff made up 45.7 percent of the CFPB’s workforce in FY 2014. The other division of a significant size that is projected to grow in FY 2015 is the consumer response unit, which is slated to expand from 11.8 percent of the staff to 12.4 percent. There are two other large divisions – the operations unit and the research, markets and regulations unit – and both are projected ...