The CFPB and FTC have announced a settlement with Green Tree Servicing LLC, a national mortgage servicing company, regarding its loan servicing and debt collection practices. Under the proposed settlement, Green Tree will pay $63 million dollars of which $48 million will be paid to affected consumers and the remainder will be paid as a civil penalty. Additionally, Green Tree will be subjected to significant and onerous remediation requirements.
According to the complaint, Green Tree engaged in deceptive practices which included requiring good faith or upfront payments in violation of HAMP and refusing to honor “in process” loan modifications between the consumer and prior loan servicer. Additionally, the complaint alleges that Green Tree engaged in unlawful debt collection practices both under the FDCPA as well as the general prohibition on unfair and deceptive acts set forth in §5 of the FTC Act and §§1031 and 1036(a)(1)(B) of the CFPA. The proscribed debt collection practices set forth in the Complaint include:
- Disclosing debts to third parties, including family members, employers, coworkers and neighbors;
- Calls as early as 5 AM and as late as 11 PM;
- The use of profane language;
- Calling consumers between 7-20 times a day on a daily basis;
- Leaving multiple voice mail messages each day;
- Threatening consumers with arrest and imprisonment;
- Pressuring consumers to use a payment method that includes a $12 convenience fee per transaction without offering other alternatives for payment; and
- Taking payment from consumer accounts with their consent.
The complaint further alleges inaccurate credit reporting and problems with the administration of consumer escrow accounts. Significantly with respect to the debt collection activities, the complaint encompasses accounts covered by the FDCPA (those accounts in which Green Tree became the servicer when the account was already past due) and those covered by the FTC Act and the CFPA (accounts in which Green Tree became the servicer pre-default). The Complaint additionally asserts claims under the FCRA and RESPA.
The Proposed Consent Order, in which Green Tree admits no wrongdoing, requires both monetary payments as well as remediation. The Consent Order:
- Requires payment of $18 million dollars for the alleged misrepresentations relating to the alleged misrepresentations concerning payment methods requiring a convenience fee;
- Requires payment of $30 million dollars for the alleged misconduct involving short sales and in-process loan modifications;
- Requires payment of $15 million dollars in civil penalties to the CFPB;
- Prohibits the conduct complained of;
- Requires the establishment and use of a “comprehensive data integrity program reasonably designed to ensure the accuracy, integrity, and completeness of the data and other information about the accounts that” Green Tree services, collect or sells;
- Requires ongoing testing and correction of errors;
- Requires the submission and approval by the CFPB of a data integrity program;
- For eight years, requires a biennial assessment and report by a third party professional assessing the data integrity program which will be subject to review by the FTC;
- Requires the establishment of a “home preservation plan”, effective for five years, designed to “identify and review” identified consumers for "loss mitigation options, provide for the solicitation and fast-track evaluation of loss mitigation applications and stop pending foreclosure sales for such consumers to the extent necessary to permit the consumers to be solicited and considered for loss mitigation”;
- For 5 years requires quarterly disclosures to consumers with past due debts serviced by the Defendant which include customer service information, as well as directions as to how to contact the FTC and CFPB concerning the manner in which the account is being collected;
- Requires the provision to all employees, who are required to acknowledge their receipt in writing, of a lengthy and detailed notice of their responsibilities under the FDCPA;
- For five years, requires the delivery to all officers, directors, managers and members a copy of this Order, the FDCPA, the FCRA and RESPA;
- For five years, requires that a copy of the Order must also be provided to all employees, along with a copy of the aforementioned statutes relevant to their job responsibilities;
- Requires the delivery of certain compliance notices to the FTC for 15 years;
- For fifteen years, subjects Green Tree to stringent record keeping (with a five year retention period) which includes a record of all complaints received from consumers, recordings to the extent allowed by state law of 90% of all telephone calls (limited to a two year retention period), copies of all training materials, accounting records, personnel records; and
- Provides that the monetary obligations are nondischargeable in bankruptcy.
- The investigation is consistent with the targets identified by the CFPB: markets where the consumer has no choice in his provider and businesses with large market share;
- In its attack on the pre default accounts Green Tree was servicing, the complaint is consistent with the CFPB’s position that it can regulate debt collection even regarding actors not covered by the FDCPA. It is important to note that the complaint did not limit itself to the authority of the FDCPA for accounts that Green Tree was servicing post default but also asserted authority to regulate violations with respect to accounts which were assigned to Green Tree pre-default and for which Green Tree was not a debt collector under the FDCPA; and
- While the debt collection activities complained of are egregious, the primary focus of the Consent Order appears to be directed towards the convenience fee issue and the loan modification and short sale issues.