Consumer Financial Protection Bureau

CFPB Settles with Bank for Allegedly Unlawful Debt Sales and Collection Practices

  • The Consumer Financial Protection Bureau (“CFPB”) reached two separate settlements with Citibank, N.A.: first, for alleged violations of the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act; and second, with Citibank and two debt collection law firms for alleged violations of the Fair Debt Collection Practices Act.
  • According to the CFPB, Citibank allegedly provided inaccurate and inflated APR information for credit card accounts it sold to debt buyers and failed to “promptly” forward customer payments to debt buyers.  In addition Citibank, through two debt collection law firms, allegedly altered dates and amounts owed on affidavits after they were executed.
  • Under the terms of the first consent order, Citibank will refund approximately $4.89 million to consumers impacted by the allegedly unlawful debt sales, pay $3 million in penalties, and, among other things, stop selling debt it cannot verify.  Under the terms of the second consent order, Citibank must comply with a New Jersey court order requiring customer refunds and must stop collecting debts resulting from the altered affidavits, and the debt collection law firms will collectively pay $75,000 in penalties for the alleged altered affidavits.

CFPB Announces New Policy in Attempt to Reduce Regulatory Uncertainty for New Consumer Products

  • The Consumer Financial Protection Bureau (“CFPB”) announced that it will establish a process to “facilitate marketplace innovation” by allowing companies to seek “no-action letters” from the CFPB that proposed new consumer financial products comply with relevant statutes and regulations.
  • The new policy, which was first proposed in 2014, would allow companies developing certain new financial products, services and technologies to apply for a no-action letter from the CFPB, which it would grant in instances where the products and services “promise[d] substantial benefit to consumers.” A no-action letter also would indicate that the CFPB has “no present intention to recommend enforcement or supervisory action” with respect to the scope of the application.
  • According to the press release, the policy will be limited to companies with new technologies, and “the letters are not binding and are also revocable at any time.”

Consumer Protection

Massachusetts Attorney General Settles with Bank for Force-Placed Insurance Policies

  • Massachusetts AG Maura Healey reached a settlement with HSBC Holding PLC to resolve allegations that it violated state consumer protection laws when it received commissions and other kickbacks from insurer Assurant Inc. relating to force-placed insurance policies.
  • According to AG Healey’s office, Assurant Inc. allegedly paid an HSBC affiliate improper commissions for the sale of force-placed insurance policies and improperly allowed the affiliate to share in the profits of Assurant’s force-placed insurance business.  Force-placed insurance is property insurance that mortgage servicers obtain on behalf of homeowners when they believe the homeowners have not maintained adequate insurance.
  • Under the Assurance of Discontinuance, HSBC will provide $2.675 million in refunds to affected homeowners and will pay $1.4 million to the Commonwealth.  Recently AG Healey along with 49 other AGs and three federal agencies reached a separate $470 million joint settlement with HSBC over alleged mortgage servicing abuses.

New York Attorney General Stops Company from Seeking Default Judgments Against Hundreds of Small Businesses

  • New York AG Eric Schneiderman reached a settlement with Buffalo Biodiesel, a company that converts cooking oil waste into biodiesel, to resolve allegations that the company used the legal system to “unjustly bully and intimidate small businesses.”
  • According to AG Schneiderman, Buffalo Biodiesel allegedly filed over 600 identical breach of contract lawsuits seeking damages against small businesses that lacked specific information on how the contracts were allegedly breached and then sought default judgments when the businesses did not respond.
  • Under the terms of the agreement, Buffalo Biodiesel will withdraw all default judgment requests, voluntarily vacate the default judgments that it has already taken against unrepresented businesses, and refund money already collected on judgments.  In addition, the company agreed to provide notice of its intent to sue to give the targeted businesses the opportunity to resolve the matter without a lawsuit.

For-Profit Colleges

FTC Sues Online School for Misleading Consumers Regarding Its High School “Diploma” Program

  • The Federal Trade Commission (“FTC”) filed a complaint against Stratford Career Institute, Inc. (“Stratford”), an online distance education school, for allegedly violating the FTC Act’s prohibition on deceptive advertising practices related to the company’s marketing of its “High School Diploma” distance learning course.
  • According to the complaint, Stratford allegedly made false and unsubstantiated promises to consumers about its high school equivalency program by, among other things, stating in advertisements that a “diploma” from their program will lead to an increase in earning potential, access to better jobs and promotions, and the ability to apply for higher education, even though Stratford was aware that many prospective employers and college admissions officers did not accept the diplomas.
  • The FTC’s complaint seeks, among other things, to permanently prohibit Stratford from misleading consumers about its high school program and restitution for harmed consumers.

Health Care

Massachusetts Attorney General Settles with Health Insurance Provider for Restricting Access to Treatments for Autism Spectrum Disorder

  • Massachusetts AG Maura Healey reached a settlement with Tufts Associated Health Plans, Inc. (“Tufts”), to resolve allegations that it inhibited member access to coverage for Autism Spectrum Disorder treatments, in particular Applied Behavioral Analysis (“ABA”) therapy, in violation of the Commonwealth’s laws regarding autism insurance, mental health parity, and consumer protection.
  • According to AG Healey, Tufts allegedly conditioned coverage upon parental presence at every ABA therapy appointment, and further denied coverage for ABA therapy provided in daycare or preschool settings.
  • Under the terms of the Assurance of Discontinuance, Tufts will reimburse members who paid out-of-pocket for ABA therapy, revise its policies, and pay $5,000 in penalties, $20,000 in attorneys’ fees and costs, and $65,000 to improve care and treatment related to autism.

Utilities

New Mexico Attorney General Seeks Reconsideration of Electric Company Rate Proposal

  • New Mexico AG Hector Balderas filed a motion, joined by the city of Las Cruces and Dona Ana County, with the New Mexico Public Regulation Commission (“Commission”) urging the Commission to order the hearing examiner to reexamine a rate increase proposal filed by El Paso Electric (“EPE”) after the examiner previously recommended approval with conditions.
  • According to reports, the AG found the examiner’s approval of a $640,000 rate hike, from EPE’s $6.4 million request, did not go far enough where the proposal allegedly would still result in increased rates for residential customers while reducing rates for businesses and government entities.