Just before the holiday weekend, the Federal Trade Commission announced a group of dealerships in Arizona and New Mexico must cease business operations.
It’s all part of a court-approved settlement resolving charges the regulator made two years ago that the dealerships deceived consumers and falsified information on vehicle-financing applications.
In a case filed in 2018, the FTC alleged that Tate’s Auto Center of Winslow, Tate’s Automotive, Tate Ford-Lincoln-Mercury (doing business as Tate’s Auto Center), Tate’s Auto Center of Gallup and Richard Berry, an officer of the dealerships, falsified consumers’ income and down payment information on vehicle-financing applications and misrepresented important financial terms in vehicle advertisements.
According to a news release, the case continues against Berry and relief defendant Linda Tate.
The FTC indicated the settling defendants are currently in Chapter 7 bankruptcy proceedings and are under the control of a bankruptcy trustee. The settlement includes a monetary judgment of $7,203,227 against the defendants and makes the FTC an unsecured claimant in the bankruptcy proceedings.
In addition, the regulator said the settlement prohibits the trustee from selling any consumer information held by the defendants as part of the liquidation of the company’s assets. Instead, the trustee must either destroy the information or provide it to the FTC for destruction.
The FTC vote approving the stipulated final order was 3-0-2, with commissioners Rebecca Kelly Slaughter and Christine Wilson recorded as not participating. The settlement was approved and entered in the U.S. District Court for the District of Arizona.
“These auto dealers sent bogus applications to finance companies to qualify consumers for car loans that they could not afford, subjecting the consumers to defaults and repossessions,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection.
“Falsifying income and down payment information on car loan documents is illegal, and the FTC won’t hesitate to take action against car dealers who engage in this harmful conduct,” Smith went on to say.
Last week, the Federal Trade Commission announced it issued an administrative complaint against a marketer pushing a program involving dealership and potential pandemic stimulus benefits.
And this week over at the Consumer Financial Protection Bureau, officials said they will provide an additional 60 days for public comment on its request for information on how best to create a regulatory environment that expands access to credit and ensures that all consumers and communities are protected from discrimination in all aspects of a credit transaction.
The FTC action involved Traffic Jam Events and its owner, David Jeansonne II, charging multiple counts of deceptive conduct. The FTC explained administrative complaint mirrors a prior federal court complaint, which the regulator said it voluntarily dismissed to pursue a broader administrative proceeding.
The administrative complaint alleged that the marketing agency deceived consumers with mailers supposedly directing them to obtain federal COVID-19 stimulus benefits. The complaint also alleged that, in addition to the misleading COVID-19 mailers, the company sent flyers to consumers containing matching numbers indicating that consumers had won a valuable prize.
The FTC said consumers were then told they had to go to a dealership to “claim” the prize, but the small print on the back of the mailer revealed that there was only a 1-in-52,000 chance the consumer had actually won the prize specified.
In addition to FTC Act violations alleged related to the COVID-19 and prize mailers, the FTC’s complaint claimed the respondents violated the Truth In Lending Act and Regulation Z for failing to clearly disclose required credit information in their advertising.
The FTC vote to issue the administrative complaint and dismiss the federal proceeding was 4-0-1, with commissioner Rebecca Kelly Slaughter recorded as not participating.
The FTC reiterated that it issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the commission that a proceeding is in the public interest.
“The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge,” officials said.
Update on CFPB project
Earlier this summer, the CFPB issued a request for information to seek public input on how best to create a regulatory environment that expands access to credit and ensures that all consumers and communities are protected from discrimination in all aspects of a credit transaction.
The bureau reiterated that the Equal Credit Opportunity Act and Regulation B make it unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, or age; because all or part of the applicant’s income derives from any public assistance program; or because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.
The original deadline for submissions was Oct. 2. The comment period will now close on Dec. 1.
“The information provided will help the bureau continue to explore ways to address regulatory compliance challenges while fulfilling the bureau’s core mission to prevent unlawful discrimination and foster innovation,” officials said in a news release.
The CFPB added the RFI is in lieu of a symposium the bureau had planned to host on ECOA issues this fall.
To read the RFI, go to this website.
Discrimination allegations from the Federal Trade Commission against a New York City dealer resulted in a $1.5 million settlement.
The FTC announced this week that Bronx Honda and general manager Carlo Fittanto will pay $1.5 million to settle charges they discriminated against African-American and Hispanic vehicle buyers and engaged in numerous other illegal business practices.
According to the FTC’s complaint, the defendants told salespeople to charge higher financing markups and fees to African-American and Hispanic customers. The FTC also asserted the defendants told employees that these groups should be targeted due to their limited education and not to attempt the same practices with non-Hispanic white consumers.
According to the complaint, African-American and Hispanic customers also paid more for financing than similarly situated non-Hispanic white consumers.
The complaint alleged that African-American consumers were charged about $163 more in interest than similarly situated non-Hispanic white consumers, while Hispanic consumers were charged about $211 more in interest.
In addition to alleged racial discrimination, the FTC said the defendants were charged with numerous illegal practices in the advertising and sales process that caused consumers to pay substantially more than they expect. The complaint alleged that the defendants:
• Failed to honor advertised sale prices, inflating the cost through a variety of methods
• Changed the sales price on paperwork in the middle of the sale without telling the consumer, a practice the defendants internally referred to as adding “air money” to the contract
• Double-charged consumers for taxes and fees without their knowledge
• Told consumers that they had to pay thousands of dollars in unnecessary fees to purchase “certified pre-owned” cars that were not required by that program.
The complaint goes on to allege that the defendants violated the FTC Act, the Truth in Lending Act (TILA) and the Equal Credit Opportunity Act (ECOA).
In addition to the $1.5 million payment that will be used to provide redress to consumers, the FTC indicated the settlements also prohibit Bronx Honda and Fittanto from misrepresenting the cost or terms to buy, lease, or finance a vehicle, or whether a fee or charge is optional. They will also be required to establish a fair lending program that will, among other components, cap the amount of additional interest markup they can charge consumers.
“The FTC would like to thank the Bronx District Attorney’s Office for its invaluable assistance with the investigation and for its work as a law enforcement partner in protecting consumers,” officials said.
The commission vote authorizing the staff to file the complaint and stipulated final order was 5-0. Commissioners Rohit Chopra and Rebecca Kelly Slaughter each issued concurring statements. The FTC filed the complaint and final order in the U.S. District Court for the Southern District of New York.
The FTC reiterated that it files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the district court judge, according to the FTC.
This week, Federal Trade Commission chairman Joe Simons released a summary of the agency’s 2019 annual highlights, calling attention to the commission’s ongoing efforts to protect consumers and promote a competitive marketplace.
By far the largest sum included among the judgments the FCC specified in the monetary relief category stemmed from the settlement federal officials reached in July with Equifax over its data breach. The FTC portion of that development included $425 million.
The annual report also recapped FTC actions have led to more than $232 million in direct refunds to consumers across the country, with $136 million sent directly from the FTC. Over the last four years, officials tabulated that consumers have cashed more than $1 billion in FTC refund checks.
The report went on to mention the FTC continued its efforts to challenge “harmful” mergers and stop anti-competitive business conduct. For example, the commission took enforcement actions to preserve competition in health care and consumer products markets and established a new Technology Enforcement Division to investigate potential anticompetitive conduct in digital platform markets.
“We continued to advance our aggressive enforcement agenda in 2019,” Simons said in a news release. “In addition to the record-breaking privacy settlements with Facebook, and Google/YouTube, the FTC challenged a host of anticompetitive mergers and conduct, and took action to stop consumer fraud and deception in the marketplace.”
The complete report can be downloaded on this webpage.
New information released this week by the Federal Trade Commission reinforced how widespread fraud is — and not just in the auto-finance industry.
The FTC’s Consumer Sentinel Network received 3.2 million reports in 2019, including nearly 1.7 million fraud reports as well as identity theft and other reports. The Consumer Sentinel Network is a database that receives reports directly from consumers, as well as from federal, state and local law enforcement agencies and a number of private partners.
Officials said consumers reported losing more than $1.9 billion to fraud in 2019, with nearly $667 million lost to imposter scams alone. While scammers target consumers using every possible method of communication, the FTC said phone calls were the most common.
The regulator indicated the most common type of fraud reported to the FTC in 2019 was imposter scams; government imposter scams, in particular, were the most frequently reported, and up more than 50% since 2018.
Of all reports received, the FTC noted the top categories included identity theft, imposter scams, telephone and mobile services, online shopping and credit bureaus.
A small percentage of consumers who reported they encountered a fraud over the phone said they actually lost money. When they did, the FTC found the median individual loss was more than $1,000.
The FTC reiterated that it uses the reports it receives through the Sentinel network as the starting point for most of its law enforcement investigations, and the agency also shares these reports with more than 2,500 law enforcement users around the country.
“While the FTC does not respond to individual complaints, Sentinel reports are a vital part of the agency’s law enforcement mission,” officials said.
The Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) will host a public workshop on Tuesday to discuss issues affecting the accuracy of both traditional credit reports and employment and tenant background screening reports.
The regulators shared 11 different questions they might be tackling in light of marketplace changes during the past five years.
Since the FTC released its 2012 study on accuracy in credit reporting, officials acknowledged there have been several changes in the landscape that impact the accuracy of consumer reports. In 2012, the CFPB began conducting supervisory reviews over large credit reporting agencies (CRAs), as well as various providers of consumer financial products or services that furnish information about consumers to CRAs.
In addition, in 2015, following state investigations regarding various credit reporting issues, officials recollected that the nationwide CRAs agreed to a multi-state settlement that requires stricter standards for matching records, removal of certain public record information, and restrictions on medical debt reporting. Also, new developments, such as the use of machine learning and alternative data in making eligibility determinations, present both opportunities and challenges for the consumer reporting industry.
The CFPB and the FTC said their workshop seeks to bring together stakeholders — including industry representatives, consumer advocates and regulators — for a wide-ranging public discussion on the many issues impacting the accuracy of consumer reports.
Potential topics for discussion include:
— What are the lessons from the CFPB’s supervisory reviews of CRAs and furnishers on accuracy and dispute obligations?
— What are the lessons from CFPB and FTC enforcement cases on furnisher and CRA accuracy obligations?
— How do furnishing practices differ based on the types of furnishers and the information they furnish to CRAs, and how does that impact accuracy?
— What has been the effect of the removal of most civil judgments and tax liens from credit reports and recent changes in the reporting of medical debt?
— How do background screening CRAs address accuracy in light of the limited personal identifying information included in public records?
— What opportunities or challenges does inclusion of non-traditional data in credit reports, credit scoring models, or background screening reports present for accuracy?
— Can new technologies and data management practices be used to improve accuracy?
— How do consumers learn about inaccuracies on their consumer reports and navigate the current dispute process? What are the experiences of victims of identity theft in the dispute process?
— How have the changes to the dispute process contained in the National Consumer Assistance Plan, which evolved out of the 2015 multi-state settlement, impacted the consumer experience?
— Once consumers get erroneous information removed from their credit files through the dispute process, do they still have difficulties getting loans or other credit?
— What government measures (including changes in the law) and private sector measures could improve accuracy? What are the costs and benefits of these possible measures?
The workshop, which is free and open to the public, will be at the Constitution Center, 400 7th St., SW in Washington, D.C., and will be webcast live on the FTC’s website.
The Federal Trade Commission recently announced a pair of development; the first in connection with one of its latest rules and the other with the fourth installment of an ongoing study.
Starting Oct. 31, many members of the military now have access to free electronic credit monitoring.
In response to a new FTC Rule implementing a 2018 law, the regulator said the nationwide credit reporting agencies — Equifax, Experian and TransUnion — are providing free electronic credit monitoring services to active duty service members and National Guard members. Credit monitoring services can alert consumers to mistakes or problems with their credit reports that might stem from the unauthorized use of their personal information to obtain credit.
Back in June, the FTC finalized the rule that requires the nationwide consumer reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty military consumers.
The Free Electronic Credit Monitoring for Active Duty Military Rule implemented legislation included in the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended the Fair Credit Reporting Act (FCRA) by requiring CRAs to notify active duty military consumers about any “material” additions or modifications to their credit files.
The FTC received 19 comments on its proposed rule, released last November, which defined key terms such as “electronic credit monitoring service” and “material additions or modifications” to the file of a consumer. It also included proposed requirements for how CRAs can verify that an individual is an active duty military consumer, as well as restrictions on the use of personal information and on communications surrounding enrollment in the free service.
Officials explained the final rule defines “active duty military consumer” as a consumer in military service who meets the FCRA’s definition of “active duty military consumer,” which requires that the consumer be assigned to service away from their usual duty station, or be a member of the National Guard.
“While commenters recommended eliminating the requirement that a military consumer be assigned to service away from their usual duty station, the statute limits the commission’s discretion on this topic,” the FTC said.
“To the extent that Congress intended to provide free credit monitoring more broadly, the commission calls on Congress to address this issue through additional legislation,” the FTC added.
The regulator also mentioned the final rule clarifies that National Guard members do not need to be deployed away from their usual duty stations to be eligible for the free credit monitoring.
“Because the statute does not expressly apply the duty station requirement to National Guard members, the commission has interpreted the act as providing the benefit of free credit monitoring to members of the National Guard regardless of whether they are assigned away from their usual duty station,” officials said.
Furthermore, the FTC pointed out its final rule also addresses concerns that active duty military consumers might have to pay to access their credit files after being alerted to an addition or change.
Officials noted the final rule requires that when a CRA notifies an active duty military consumer about a material change to their credit file, the CRA must also provide that consumer with free access to that file.
The final rule extends the amount of time the CRAs have to notify an active duty military consumer of a material change from 24 hours to 48 hours. In addition, the final rule makes certain changes to the definition of “material additions or modifications,” according to the FTC.
Latest fraud study results
In other developments from the regulator, the FTC recently released the results of a comprehensive survey conducted in 2017 that examined the prevalence of mass-market consumer fraud, how it is perpetrated and what factors are associated with a greater likelihood that a consumer may fall victim to fraud.
The FTC conducted similar surveys in 2003, 2005 and 2011.
The survey results showed that 15.9% of the respondents were victims of fraud in 2017, which represents approximately 40 million U.S. adults.
Officials indicated the most common types of fraud reported by the survey respondents were fraudulent weight-loss products, fraudulent computer repairs and being falsely told that they owed money to the government.
The FTC said other commonly reported types of fraud included unauthorized billing for buying club memberships, unauthorized billing for an item for a cell phone and fraudulent prize promotions. The survey results indicate that each of these types of fraud had more than two million U.S. adult victims.
Internet transactions, which continue to grow, accounted for a substantial share of fraudulent incidents. According to the survey, 54% of all incidents of fraud involved Internet promotion of products and services, up from 33% in the 2011 survey.
The survey results determined that consumers ages 35 to 54 were more likely to be victims of fraud compared to consumers in other age categories. According to the survey, 22% of respondents between 35 and 44, and 20% of respondents between 45 and 54, were victims of fraud.
The survey also found that women were more likely to be fraud victims than men, with 19% of women reporting that they were victims of fraud, compared to 13% for men.
“The survey results indicate that people who were more willing to take risks, and those who had recently experienced a negative life event (such as a severe illness or the death of a loved one), were more likely to have been fraud victims,” the FTC said.
“Those experiencing high levels of debt and those who predicted that their incomes would rise substantially in the next few years were also more likely to have been fraud victims,” the regulator went on to say.
The Federal Trade Commission closed its settlement case with a dealer software provider involved in a data breach but not before accepting a public comment from the National Automobile Dealers Association, which took a broad view of the developments.
Late last week, the FTC approved a final order settling charges against DealerBuilt, an Iowa-based dealer software provider that allegedly failed to take reasonable steps to secure consumers’ data, leading to a breach that exposed the personal information of millions of consumers.
In its complaint, the FTC alleged that LightYear Dealer Technologies, which does business as DealerBuilt, failed to implement readily available and low-cost measures to protect the personal information it obtained from its dealer clients. The FTC alleged these failures led to a breach of DealerBuilt’s backup database beginning in late October 2016, when a hacker gained access to the unencrypted personal information — such as Social Security numbers and other sensitive data — of about 12.5 million consumers stored by 130 DealerBuilt customers.
As part of the settlement with the FTC, DealerBuilt is prohibited from sharing, collecting, or maintaining personal information unless it implements and maintains a comprehensive information security program designed to protect the personal information it collects.
Among other things, the order requires DealerBuilt to implement specific safeguards that address the allegations in the FTC complaint.
The proposed settlement also requires the company to obtain third-party assessments of its information security program every two years.
Under the order, the assessor must specify the evidence that supports its conclusions and conduct independent sampling, employee interviews, and document review. In addition, the order requires a senior corporate manager responsible for overseeing DealerBuilt’s information security program to certify compliance with the order every year.
Finally, the order grants the FTC the authority to approve the assessor for each two-year assessment period.
So why did NADA get involved? In his letter to the FTC, NADA vice president of regulatory affairs Paul Metrey emphasized his comments did not stem from the merits of the proposed consent agreement between the FTC and DealerBuilt. Rather, Metry said his letter was “to urge the commission to refrain from using this or other individual enforcement actions to determine whether, and to what extent, it should amend its Standards for Safeguarding Customer Information (Safeguards Rule) which the commission is currently reviewing in a separate notice of proposed rulemaking (NPR).”
Metry continued by sharing his recommendation on how the FTC could carry out that review.
“The process for developing regulatory standards that affect entire industries should be developed in a transparent, informed, and data-driven manner by seeking public input from stakeholders on a variety of issues, including the costs, burdens, and benefits related to the standards — or amended standards — under consideration,” he said. “Developing or backing into regulatory standards by relying on enforcement actions that are based on discrete fact patterns and case-specific legal or policy arguments could exclude from the commission’s review key considerations to an issue.
“As the commission considers potential modifications to the Safeguards Rule, we urge it to base its final action on the record that is developed in response to the NPR and not on consent orders that it has entered into with respondents for alleged violations of the Safeguards Rule,” Metry went on to say.
After receiving that one comment, the FTC voted 5-0 to approve the administrative complaint and to accept the consent agreement with DealerBuilt as well as a response to NADA.
Perhaps involving consumers who also have installment contracts with subprime auto finance providers, the Consumer Financial Protection Bureau and the Federal Trade Commission each announced enforcement actions against firms the regulators deemed to be orchestrating fraudulent debt-relief programs.
Over at the CFPB, the bureau recently settled its lawsuit against Freedom Debt Relief, one of the nation’s largest debt-settlement services providers. The company agreed to pay $20 million in restitution to affected consumers and a $5 million civil money penalty.
Meanwhile, the FTC said it recently has stopped a student loan debt relief scheme, alleging it bilked more than $23 million from thousands of consumers with false claims that it would service and pay down their student loans.
The bureau’s lawsuit alleged that Freedom Debt Relief violated the Telemarketing Sales Rule by charging advance fees and failing to inform consumers of their rights to funds they deposited with the company. The bureau also alleged that Freedom Debt Relief violated the Consumer Financial Protection Act of 2010 by charging consumers without settling their debts as promised, charging consumers after having them negotiate their own settlements with creditors, and misleading consumers about the company’s fees and its ability to negotiate directly with all of a consumer’s creditors.
Officials explained the settlement enjoins Freedom Debt Relief from engaging in this conduct in the future. The company has also agreed to a consent order with the Federal Deposit Insurance Corp (FDIC).
The bureau will remit $493,500 of the $5 million civil penalty it assessed in light of the penalty that the company was ordered to pay the FDIC.
“This settlement is subject to approval by the court,” the CFPB said.
The judicial system also is involved in the FTC’s newest matter. After the FTC filed a complaint seeking to end deceptive practices by the firm connected to its investigation, officials said a federal court temporarily halted the scheme and froze its assets.
According to the FTC’s complaint, since at least 2014, the operators of Mission Hills Federal and Federal Direct Group have lured consumers into paying hundreds to thousands of dollars in illegal upfront fees with false promises to lower consumers’ monthly student loan payments. The defendants also allegedly tricked consumers into submitting their monthly student loan payments directly to the defendants by falsely claiming to take over servicing the consumers’ loans.
In reality, Andrew Smith, director of the FTC’s Bureau of Consumer Protection, explained the defendants either only applied minimal payments on consumers’ loans or, in many instances, applied none of the payments to the loans, diverting consumers’ payments to themselves.
“Debt relief companies can’t collect advance fees or masquerade as federal student loan servicers,” Smith said in a news release. “Anyone asking for upfront fees to help with student loan debt is likely a scammer, and consumers should hang up and alert the FTC.”
The FTC also alleged that the defendants obtained consumers’ student loan credentials, such as their FSA ID — a username and password used to log in to U.S. Department of Education websites — to log in and change consumers’ contact information, effectively hindering or entirely preventing consumers’ loan servicers from communicating with consumers.
Many consumers went months or years before discovering that their student loans were not being repaid, according to the complaint.
The FTC has charged the following defendants with violating Section 5 of the FTC Act and the Telemarketing Sales Rule:
— Elegant Solutions (also doing business as Federal Direct Group)
— Trend Capital (also doing business as Mission Hills Federal)
— Dark Island Industries (also doing business as Federal Direct Group and formerly known as Cosmopolitan Funding)
— Heritage Asset Management (also doing business as National Secure Processing)
— Tribune Management (also doing business as The Student Loan Group)
— Three individual defendants, Mazen Radwan, Rima Radwan and Dean Robbins
The commission vote authorizing the staff to file the complaint was 5-0. The U.S. District Court for the Central District of California entered a temporary restraining order in the case on July 10.
The FTC reiterated that it files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the regulator that a proceeding is in the public interest.
“The case will be decided by the court,” the FTC added.
The past seven days have been quite active at the Federal Trade Commission. The regulator made moves involving credit reporting and active military personnel, took action in connection with an alleged credit repair scheme and worked with and its law enforcement partners for a major crackdown on illegal robocalls.
What might be most pressing for auto finance companies is the FTC finalized the rule implementing a 2018 law that requires the nationwide consumer reporting agencies (CRAs) to provide free electronic credit monitoring services for active duty military consumers.
FTC officials explained the Free Electronic Credit Monitoring for Active Duty Military Rule, which will be published in the Federal Register shortly, implements legislation included in the 2018 Economic Growth, Regulatory Relief, and Consumer Protection Act, which amended the Fair Credit Reporting Act (FCRA) by requiring CRAs to notify active duty military consumers about any “material” additions or modifications to their credit files.
The FTC said it received 19 comments on its proposed rule, released in November, which defined key terms such as “electronic credit monitoring service” and “material additions or modifications” to the file of a consumer. It also included proposed requirements for how CRAs can verify that an individual is an active duty military consumer, as well as restrictions on the use of personal information and on communications surrounding enrollment in the free service.
Officials indicated the final rule defines “active duty military consumer” as a consumer in military service who meets the FCRA’s definition of “active duty military consumer,” which requires that the consumer be assigned to service away from their usual duty station, or be a member of the National Guard.
“While commenters recommended eliminating the requirement that a military consumer be assigned to service away from their usual duty station, the statute limits the commission’s discretion on this topic,” the FTC said.
“To the extent that Congress intended to provide free credit monitoring more broadly, the commission calls on Congress to address this issue through additional legislation,” the regulator added.
Officials went on to mention the final Rule also clarifies that National Guard members do not need to be deployed away from their usual duty stations to be eligible for the free credit monitoring.
“Because the statute does not expressly apply the duty station requirement to National Guard members, the commission has interpreted the act as providing the benefit of free credit monitoring to members of the National Guard regardless of whether they are assigned away from their usual duty station,” the FTC said.
The regulator also pointed out the final rule addressed concerns that active duty military consumers might have to pay to access their credit files after being alerted to an addition or change. The final rule requires that when a CRA notifies an active duty military consumer about a material change to their credit file, the CRA must also provide that consumer with free access to that file.
The final rule extends the amount of time the CRAs have to notify an active duty military consumer of a material change from 24 hours to 48 hours. In addition, the final rule makes certain changes to the definition of “material additions or modifications,” according to officials.
“The final rule retains restrictions on secondary uses and disclosures of information collected from an active duty military consumer requesting the credit monitoring service,” the FTC said. “It also bans marketing during the enrollment process until after an active duty military consumer has been enrolled in the free credit monitoring service.
“The final rule also prohibits the CRAs from requiring active duty military consumers to agree to terms or conditions, unless such terms or conditions are necessary to comply with applicable legal requirements,” the regulator went on to say.
The FTC noted the Rule will go into effect three months after publication in the Federal Register. The regulator, however, will allow the CRAs to comply with certain portions of the rule by offering their existing commercial credit monitoring services for free to active duty military consumers, for a period of up to one year from the effective date.
The FTC vote to publish the final rule in the Federal Register was 5-0.
Alleged scammers charged upfront fees and falsely promised to improve credit scores
At the request of the FTC, a federal court has temporarily halted and frozen the assets of Grand Teton Professionals, an alleged credit repair scheme that charged illegal upfront fees and falsely claimed to repair consumers’ credit.
A news release stated the company and other defendants are charged with violating the FTC Act and several provisions of the Credit Repair Organizations Act, the Telemarketing Sales Rule, the Consumer Review Fairness Act, the Truth in Lending Act, and the Electronic Funds Transfer Act.
According to the FTC’s complaint, since at least 2014, two of the defendants — Douglas Filter and Marcio Andrade — have operated an unlawful credit repair scam that bilked consumers out of at least $6.2 million.
“A good credit score can help you buy a home, get a business loan, or finance an education,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection. “These companies preyed on consumers who wanted to clean up their credit by making false promises and taking illegal upfront fees.”
The FTC charged that the defendants, using such trade names as Deletion Experts, Inquiry Busters, and Top Tradelines, used deceptive websites, unsolicited emails, and text messages to target consumers with false promises of substantially improving consumers’ credit scores by claiming to remove all negative items and hard inquiries from consumers’ credit reports.
Officials said the defendants also falsely claimed to substantially improve consumers’ credit scores by promising to add consumers as “authorized users” to other individuals’ credit accounts, a practice known as adding “tradelines” or “piggybacking” credit. In most instances, however, the defendants were not able to substantially improve consumers’ credit scores.
The complaint also alleged that the defendants charged illegal upfront fees and failed to provide consumers with required disclosures about their credit repair services. The defendants also advised consumers to mislead credit bureaus by filing false identity theft affidavits and to mislead lenders by claiming to be authorized users on other individuals’ credit accounts, according to the FTC.
In its complaint, the FTC charges that if a consumer complained about the lack of results or attempted to exercise their statutory rights to dispute the defendants’ illegal advance fees, the defendants would threaten them with legal action for violating purported anti-disparagement and anti-chargeback contract clauses. The defendants offered consumers the option of financing these substantial fees, but failed to make critical required disclosures.
When the defendants processed fees, they routinely engaged in electronic fund transfers from consumers’ bank accounts without obtaining proper authorization. The defendants often used illegal remotely created checks to pay for the credit repair services they offered through telemarketing, according the FTC’s complaint.
Under the terms of the temporary restraining order granted by the court, the company has temporarily ceased operations and the defendants’ assets are frozen.
The corporate defendants are:
— Grand Teton Professionals
— 99th Floor, LLC
— Mait Management
— Demand Dynamics
— Atomium Corps. (a Wyoming company)
— Atomium Corps. (a Colorado company)
— Startup Masters NJ (a Wyoming company)
— Startup Masters NJ Inc. (a New Jersey company)
— First Incorporation Services (a Wyoming company)
— First Incorporation Services (a Florida company)
The FTC vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the District of Connecticut.
Stopping 1 billion robocalls
Finally, the Federal Trade Commission and its law enforcement partners announced a major crackdown on illegal robocalls, including 94 actions targeting operations around the country that are responsible for more than 1 billion calls pitching a variety of products and services including credit card interest rate reduction services, money-making opportunities, and medical alert systems.
Officials highlighted the joint crackdown, “Operation Call it Quits,” is part of the FTC ongoing effort to help stem the tide of universally loathed pre-recorded telemarketing calls. It also includes new information to help educate consumers about illegal robocalls.
In addition, the FTC emphasized that it continues to promote the development of technology-based solutions to block robocalls and combat caller ID spoofing.
“Operation Call it Quits” includes four new cases and three new settlements from the FTC alone. The U.S. Department of Justice (DOJ) filed two of the new cases on the FTC’s behalf. Collectively, the defendants in these cases were responsible for making more than a billion illegal robocalls to consumers nationwide. Today’s announcement brings the number of cases the FTC has brought against illegal robocallers and Do Not Call (DNC) violators to 145.
“We’re all fed up with the tens of billions of illegal robocalls we get every year,” Smith. “Today’s joint effort shows that combatting this scourge remains a top priority for law enforcement agencies around the nation.”
In addition to the actions by the FTC, 25 federal, state, and local agencies have brought 87 enforcement actions as part of the initiative.
State partners announcing enforcement actions include the attorneys general offices for:
— Alabama
— Arizona
— Colorado
— Florida
— Illinois
— Indiana
— Michigan
— Missouri
— North Carolina
— North Dakota
— Ohio
— Oregon
— Pennsylvania
— Texas
— Virginia
The action also involved the Consumer Protection Divisions of the district attorneys for the counties of Los Angeles, San Diego, Riverside, and Santa Clara in California; the Florida Department of Agriculture and Consumer Services; and the Los Angeles City Attorney.
In addition, the United States Attorneys’ Offices for the Northern District of Georgia, Middle District of Florida, and Southern District of Texas, with support from the Treasury Inspector General for Tax Administration, have contributed five criminal actions.
“Every year, our office gets more consumer complaints about unwanted robocalls than just about any other issue,” Indiana attorney general Curtis Hill said.
“At best, these calls represent a nuisance for families just wanting to enjoy peace and privacy without needless disturbances interrupting their routines,” Hill continued. “At worst, they represent scams that successfully steal people’s identities or hard-earned money.
“In Indiana, we are quite serious about stopping illegal robocalls, and our alliances with such partners as the FTC will prove a valuable asset in this mission,” he went on to say.
