CFPB  Enforcement

  • Servicemembers: On August 14th, the CFPB announced a Consent Order against USA Discounters, Ltd., a retail chain often located near military bases.  The chain offers consumer financing for purchases. The CFPB alleged that USA Discounters engaged in deceptive acts and practices in violation of the Consumer Financial Protection Act (the CFPA is part of the Dodd-Frank Act) by requiring that servicemembers pay fees, “for legal protections servicemembers already had and for certain services that the company failed to provide.”  The CFPB obtained approximately $350,000 in refunds for affected servicemembers and imposed a $50,000 civil money penalty.  CFPB Director Richard Cordray stated, “Targeting servicemembers with scams disguised as legal benefits is unconscionable, and we will not allow this injustice to continue.”  As addressed below, on August 5th five Democratic Senators wrote a letter to Director Cordray requesting an investigation of USA Discounters.
  • Mortgages: On August 12th, the CFPB filed a Consent Order against Amerisave Mortgage Corporation, its affiliate, and the owner of each company, to obtain $14.8 million in consumer refunds and to impose a combined $6 million in penalties.  The CFPB alleged that Amerisave violated the CFPA and the Mortgage Acts and Practices Rule by deceptively advertising low interest rates, and also alleged that Amerisave violated the Real Estate Settlement Procedures Act and the Truth in Lending Act by requiring payment  authorization information for appraisals in advance of a Good Faith Estimate.  The CFPB further alleged that Amerisave “marked up” the cost of credit reports, failed to properly disclose its relationship with affiliates, and unfairly charged inflated service prices through its affiliate.  In a press release, Director Cordray added, “Today’s action puts an end to Amerisave’s unacceptable bait-and-switch scheme and holds Patrick Markert personally responsible for his illegal actions.”

CFPB & Congress

  • Servicemembers: On August 5th, Democratic Senators Jeanne Shaheen (NH), Jack Reed (RI), Richard Blumenthal (CT), Mark Warner (VA), and Tim Kaine (VA) sent a letter to Director Cordray and to Defense Secretary Chuck Hagel requesting an investigation sparked by a July 25th  Washington Post report, which, “allege[d] that certain retailers may have violated the spirit” of the Servicemember Civil Relief Act.  The article highlighted an Army Specialist’s experience with USA Discounters, which the Post stated, “transforms into an efficient collection operation” against customers who fall behind; USA Discounters has reportedly filed more than 13,470 suits against, “servicemembers based anywhere in the world.”  The article further highlighted ProPublica research showing that, “USA Discounters seizes the pay of more active-duty military than any company in the country.” The Senators wrote in their letter, “We encourage you to investigate these claims, educate our servicemembers about these practices, and look into potential actions we can take to ensure that active duty servicemembers are able to defend themselves.”

CFPB Operations

  • Virtual currencies: On August 11th, the CFPB issued a “consumer advisory” on virtual currencies such as Bitcoin. The advisory highlights risks such as:
    • The volatile exchange rate between virtual currencies and legal tender;
    • The vulnerability of virtual currency exchanges, intermediaries, and accounts to cybersecurity threats; and
    • The lack of protections for lost or stolen funds.

In a corresponding press release, Director Cordray stated, “Virtual currencies may have potential benefits, but consumers need to be cautious and they need to be asking the right questions.  Virtual currencies are not backed by any government or central bank, and at this point consumers are stepping into the Wild West when they engage in the market.” The advisory reminds consumers that they may file complaints with the CFPB regarding virtual currencies.