In an effort to keep our eyes on CFPB enforcement activity, from time to time, we highlight noteworthy enforcement actions. Earlier this year, we discussed several recent orders. Our advice was to stay out of trouble with the CFPB by implementing a “culture of compliance,” including adopting a Compliance Management System.
In today’s post, we echo that advice and review several new enforcement actions.
Freedom Stores, Inc. (December 2014) – In a particularly egregious set of facts, the CFPB and the Attorneys General of North Carolina and Virginia brought an enforcement action against Freedom Stores, Inc., Freedom Acceptance Corporation, and Military Credit Services LLC. The CFPB claimed that those companies engaged in unfair and abusive debt collection practices, including illegal lawsuits resulting in default judgments, unauthorized account withdrawals and calls to servicemembers’ commanding officers. Under a consent order, the companies agreed to pay over $2.5 million.
DriveTime Automotive Group, Inc. (November 2014) – Last month, the CFPB ordered DriveTime Automotive Group, Inc. and its related finance company, DT Acceptance Corporation, the largest buy-here, pay-here automobile dealer in the country, to pay an $8 million penalty among other remedial actions. The CFPB accused DriveTime of engaging in unfair debt collection practices and providing inaccurate information to consumer reporting agencies. Additionally, DriveTime failed to implement a furnisher policy (the importance of which we have discussed here). Director Cordray emphasized that DriveTime’s customers were “economically vulnerable.”
Franklin Loan Corporation (November 2014) – In a recent order, the CFPB ordered Franklin Loan Corporation to refund $730,000 to consumers. The CFPB claimed that Franklin violated the mortgage lender compensation rules by giving employees bonuses for steering consumers to higher priced loans. Employees received quarterly bonuses based on the interest rates of loans closed during the quarter. Notably, the CFPB did not seek a financial penalty because of “Franklin’s financial condition and the [CFPB’s] desire to maximize relief directly from Franklin Loan to affected consumers.”
Flagstar Bank (September 2014) – The CFPB ordered Flagstar Bank, a Michigan-based federal savings bank and mortgage servicer, to pay $37.5 million for impeding borrowers’ attempts to save their homes from foreclosure. Flagstar allegedly violated mortgage servicing rules by taking too long to process foreclosure relief applications, failing to notify borrowers when applications were incomplete, denying loan modifications to qualified borrowers, and delaying final loan payments. In addition to monetary penalties, the CFPB’s order required Flagstar to take other remedial and injunctive steps.