|National Mortgage Servicing Company Will Pay $63 Million to Settle FTC, CFPB Charges
Green Tree Servicing Allegedly Deceived Homeowners, Many of Whom Were Already in Financial Distress
A national mortgage servicing company will pay $63 million to resolve Federal Trade Commission and Consumer Financial Protection Bureau charges that it harmed homeowners with illegal loan servicing and debt collection practices.
The FTC and CFPB allege that Green Tree Servicing LLC made illegal and abusive debt collection calls to consumers, misrepresented the amounts people owed, and failed to honor loan modification agreements between consumers and their prior servicers, among other charges.
Under the proposed settlement, Green Tree will pay $48 million to affected consumers and a $15 million civil penalty. The company also will stop its alleged illegal practices, create a home preservation plan for some distressed homeowners, and take rigorous steps to ensure that it collects the correct amounts from consumers.
“It’s against the law for a loan servicer to lie about the debts people owe, or threaten and harass people about their debts,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working together, the FTC and CFPB are holding Green Tree responsible for mistreating homeowners, including people in financial distress.”
Green Tree has become the servicer for a substantial number of consumers who were behind on their mortgage payments at the time their loans were transferred to Green Tree. Because homeowners cannot choose their servicer, they are locked into a relationship with the company for as long as it services their loans.
Illegal Debt Collection Practices
According to the FTC and the CFPB, Green Tree’s collectors called consumers who were late on mortgage payments many times per day, including at 5 a.m. or 11 p.m., or at their workplace, every day, week after week, and left many voicemails on the same day. They also unlawfully threatened consumers with arrest or imprisonment, seizure of property, garnishment of wages, and foreclosure, and used loud and abusive language, including calling consumers “deadbeats,” mocking their illnesses and other struggles, and yelling and cursing at them. The company also allegedly revealed debts to consumers’ employers, co-workers, neighbors, and family members, and encouraged them to tell the consumers to pay the debt or help them pay it. The complaint also alleges that Green Tree took payments from some consumers’ bank accounts without their consent.
The agencies also allege that Green Tree pressured consumers to make payments via Speedpay, a third-party service that charges a $12 “convenience” fee per transaction, claiming it was the only way to pay, or that consumers had to use the service to avoid a late fee.
Mishandled Loan Modifications and Delayed Short Sale Requests
According to the complaint, in many instances, Green Tree failed to honor loan modifications that were in the process of being finalized when consumers’ loans were transferred from other servicers to Green Tree. This resulted in consumers making higher monthly payments, receiving collection calls, and even losing their homes to foreclosure. Green Tree also allegedly misled consumers about their loss mitigation options. The company told some consumers who were behind on their mortgages that they needed to make a payment to be considered for a loan modification, even for programs that prohibited the company from requiring up-front payments. In addition, Green Tree took up to six months to respond to consumers’ short sale requests despite telling them it would respond much more quickly. These delays caused consumers to lose potential buyers, miss other loss mitigation options, and face foreclosures they could have avoided.
Misrepresented Account Status to Consumers and Credit Reporting Agencies
According to the complaint, Green Tree misrepresented the amounts consumers owed or the terms of their loans. This included telling consumers they owed fees they did not owe, or that they had to make higher monthly payments than their mortgage contracts required. The company often knew or had reason to believe that specific portfolios of loans it acquired from other servicers contained unreliable or missing information. In many instances, it should have known that consumers had loan modifications from prior servicers and therefore owed lower amounts. And when consumers disputed the amounts owed or terms of their loans, Green Tree failed to investigate the disputes before continuing collections.
Green Tree also allegedly furnished consumers’ credit information to consumer reporting agencies when it knew, or had reasonable cause to believe, that the information was inaccurate, and failed to correct the information after determining that it was incomplete or inaccurate – often when consumers told Green Tree about it.
Proposed Settlement Order
In addition to the $63 million in monetary payments, the proposed settlement order includes provisions that require Green Tree to:
The proposed order also prohibits Green Tree from making material misrepresentations about loans, processing procedures, payment methods, and fees, from taking unauthorized withdrawals from consumer accounts, and from violating the Fair Debt Collection Practices Act, the Fair Credit Reporting Act, and the Real Estate Settlement Procedures Act.
The Commission vote authorizing the staff to file the complaint and proposed stipulated order was 5-0. The FTC filed the complaint and proposed stipulated order in the U.S. District Court for the District of Minnesota.
NOTE: The Commission files a 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. Stipulated orders have the force of law when approved and signed by the District Court judge.
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Debt-Buying Giant Settles Illegal Collection Charges
Debt buyer Asta Funding agreed Wednesday to settle charges brought by New York regulators for allegedly pursuing improper debt collection tactics against hundreds of consumers in the state.
The company will vacate more than 300 judgments totaling more than $1.7 million as part of the settlement with New York Attorney General Eric T. Schneiderman’s office. It also agreed to reform its collection practices and pay civil penalties and costs totaling $100,000.
According to New York regulators, Asta Funding for several years has sued consumers in the state and obtained uncontested default judgments against people who failed to respond to the lawsuits, even though the underlying claims were untimely under New York law.
- Disclosing in written or oral communications that a debt is outside the statute of limitations and that the company will not sue to collect on the debt.
- Disclosing in written or oral communications that a debt is outside the date for reporting the debt provided for by the federal Fair Credit Reporting Act and that because of the age of the debt the company will not report the debt to any credit reporting agency.
- Alleging certain information relevant to the statute of limitations in any debt collection complaint, such as the name of the original creditor, and the date of the consumer’s last payment on the debt.
Asta Funding buys unpaid consumer debts such as credit card debts from original creditors and other debt buyers. The company’s subsidiaries, which include Palisades Collection LLC and Palisades Acquisition XVI LLC, then attempt to collect on the debt.
The state’s investigation specifically found that Asta Funding unlawfully brought collection actions that were outside the statutes of limitations. Because most consumers fail to respond when they are sued by a debt collector, Asta Funding obtained default judgments in its favor based on these time-barred claims.
Asta Funding officials were not immediately available for comment. The company at press time also had not issued a formal statement.
It’s illegal for collection agencies to bring lawsuits against people when the claims are outside of the applicable statute of limitations. Under New York law, an action must be filed not only within New York’s statute of limitations but also within the statute of limitations of the state where the cause of action accrued. For example, while New York’s statute is generally six years, if the original creditor is in Delaware, which has a three-year statute, the shorter statute would apply.
The Federal Trade Commission and the Illinois Attorney General’s Office have obtained a court order temporarily halting a fake debt collection scam located in Aurora, Illinois, a western suburb of Chicago. The defendants are charged with illegally using threats and intimidation tactics to coerce consumers to pay payday loan debts they either did not owe, or did not owe to the defendants.
The FTC’s case against K.I.P., LLC, Charles Dickey, and Chantelle Dickey is the agency’s seventh ‘phantom’ debt collector matter.
“This company scared and tricked people into paying debts they didn’t owe,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working with terrific partners like the Illinois Attorney General, we will keep going after phantom debt scams like this one and shutting them down.”
“The defendants have threatened and intimidated their way into stealing hundreds of thousands of dollars from unsuspecting people all across the country,” Illinois Attorney General Lisa Madigan said. “Between our two offices, we have hundreds of complaints. It is clear they must be stopped.”
According to the complaint, since at least 2010, the defendants used a host of business names to target consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts that they either did not owe or that the defendants had no authority to collect.
Often armed with sensitive financial information, the defendants would call consumers and demand immediate payment for payday loans that were supposedly delinquent. To pressure consumers to pay, the defendants threatened that they would:
- Garnish consumers’ wages;
- Suspend or revoke their drivers’ licenses;
- Have them arrested or imprisoned; or
- File a lawsuit against them.
In response to the defendants’ repeated calls and alleged threats, many consumers paid the debts, even though they may not have owed them, because they believed the defendants would follow through on their threats or they simply wanted to end the harassing phone calls.
The complaint also charges the defendants with failing to provide consumers with a notice containing: 1) the amount of the debt; 2) the name of the creditor to whom the debt is owed; 3) a statement that unless the consumer disputes the debt, it will be assumed to be valid; 4) a statement that if the consumer does dispute the debt in writing, the defendants will verify the debt is correct; and 5) a statement that upon the consumer’s written request, the defendants will provide the consumer with the name and address of the original creditor if different from the current creditor.
Finally, the complaint charges that the defendants: called consumers at work when they knew such calls were prohibited by consumers’ employers; harassed and abused consumers; used obscene or profane language; and called consumers repeatedly with the intent of annoying or abusing them.
The complaint also alleges that the defendants violated the Illinois Consumer Fraud and Deceptive Business Practices Act and the Illinois Collection Agency Act, and that the defendants are not licensed debt collectors as required by Illinois law.
Defendants named in the case include: K.I.P., LLC; Charles Dickey, individually and as an owner, member, or managing member of K.I.P., LLC, and also doing business as (d/b/a) Ezell Williams and Associates, Corp.; Ezell Williams, LLC; Excel Receivables, Corp.; Second Chance Financial Credit, Corp.; Second Chance Financial, LLC; Payday Loan Recovery Group, LLC; Payday Loan Recovery Group; Payday Loan Recovery; International Recovery Services, LLC; International Recovery Services; and D&R Recovery. The complaint also names Chantelle Dickey, also known as Chantelle Rudd and Chantelle Williams, as an individual and as a manager of K.I.P.
The FTC and the Illinois Attorney General’s Office appreciate the Aurora Police Department, North Aurora Police Department, Better Business Bureau of Chicago and Northern Illinois, and the U.S. Postal Inspection Service Chicago Division for their valuable assistance with this matter.
For consumer information about your rights under the Fair Debt Collection Practices Act, see Facing Debt Collection? Know Your Rights. For consumer tips on dealing with phantom debt collectors, see Fake Debt Collectors.
The Commission vote approving the filing of the joint complaint was 5-0. It was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division. The court issued a temporary restraining order halting the charged practices, freezing the defendants’ assets, and appointing a temporary receiver to take control of the business.
NOTE: The Commission files a 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 case will be decided by the court.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.
Stand up to fake debt collectors
The caller is irate, intimidating and — despite the foul language — sounds convincing. He says you must make good on a payday loanor your wages will be garnished. If you applied for a payday loan before, you might start questioning your memory: “Did I miss a payment? The caller has my information, so this must be legit…”
The last thing you need is a short paycheck — especially if you’re already in a bind. So you pay. Thing is, you don’t owe them a dime. It’s a scam.
The FTC’s and the Illinois Attorney General’s complaint against K.I.P., LLC, Charles Dickey and Chantelle Dickey is the latest effort to stop scammers from trying to collect fake debts from consumers. According to the complaint, callers threatened to garnish wages, and they offered to accept, or “settle the debt,” for significantly less than the amount allegedly owed. In addition, the caller didn’t give the person any proof of the debt — even when asked. But the calls were so convincing that many consumers actually made payments — even though they didn’t owe.
Here are a few tips for standing up to these scammers:
- Ask the caller for his name, company, street address, and telephone number. Tell the caller you won’t discuss any debt until you get a written “validation notice.” If the caller refuses, don’t pay.
- Put your request in writing. The Fair Debt Collection Practices Act (FDCPA) requires any debt collector to stop calling if you ask in writing. Of course, if the debt is real, sending such a letter does not get rid of the debt, but it should stop the contact.
- Don’t give or confirm any personal, financial, or other sensitive information.
- Contact your creditor. If a debt is legitimate – but you think the collector isn’t — contact the company to which you owe the money.
- Report the call. File a complaint with the FTC and yourstate Attorney General’s office with information about suspicious callers.
from Credit & Collection News (industry publication)
Business leaders across the country are warning of the dangers in massive student loan debt, which has overtaken credit card debt as the largest debt in the nation. New York State and federal lawmakers have been inventing new loan forgiveness programs, but for many it’s not enough. Some programs fail to target the heart of the issue, and others don’t reach back to help those who already are suffering, they just aim to help protect those who will graduate in the future. The National Foundation for Credit Counseling is launching a program which aims at providing full-service counseling for college students and grads struggling under the weight of massive loans. But the Consumer Credit Counseling Service of Buffalo — which is part of the national network — is already offering those services to debt-strapped western New Yorkers. Councelor Noelle Carter says if an individual has trouble paying back a student loan, chances are they’re having trouble with all of their finances. “They may have taken out credit card debt to help supplement their living costs, and they may also not be investing in other assets,” Carter noted, saying that doesn’t contribute to the economy. “They may not be purchasing vehicles, they may not be purchasing homes. They are still living at home with their parents.” Over 43,000,000 Americans are working to pay back some form of student debt, and more than one fourth of those borrowers are delinquent or in default on their loans. “[This] is critical,” Carter said. “This student loan debt is probably going to be our next financial crisis if we don’t do something about it.”
Study finds high default rates in payday lending
By Lydia Wheeler – 03/31/15 05:52 PM EDT
In studying payday loans in North Dakota, the Center for Responsible Lending found that nearly half of all borrowers default on a loan within their first two years of borrowing.
The number — 46 percent — is attributed to borrowers who took out multiple payday loans within that two-year period or renewed just one loan.
The CRL’s study, released Tuesday, goes on to say that of the 46 percent, half defaulted within the first two payday loans they borrowed. This, said Senior Policy Researcher Susanna Montezemolo, means borrowers are getting into trouble right away.
The report comes about a week after the Consumer Financial Protection Bureau released its framework for payday loan regulation, which proposed letting lenders chose between two different sets of rules. One would prevent the borrower from getting stuck in a debt trap by forcing lenders to determine a borrower’s ability to repay before issuing a loan. The other would protect lenders after they’ve taken out a payday loan from getting trapped in fees and being unable to pay off the loan if they defaulted.
Montezemolo said the CRL’s study supports arguments that the ability to repay standard loans should to be required for every payday loan.
“This report shows a high default rate on payday loans even though lenders are first in line to be paid — a clear sign that a borrower is unable to escape the debt trap once lured in by an initial payday loan,” she said.
The CRL used data from North Dakota because it has a database that tracks each borrower in the state.
“We have no reason to think North Dakota is any different from any other state that doesn’t regulate payday lenders,” Montezemolo said.
Not only do payment checks bounce, which is known as a visible default, the CRL said there are invisible ways borrowers can default on a payday loan. They occur when the check written to the payday lender goes through but results in an overdraft or non-sufficient funds fee. The CRL said invisible defaults, which one-third of all borrowers experience, mask the true default rate and make triple-digit interest rate loans even more expensive for consumers.
Please contact us if Med-1 Solutions sued or attempted to collect money from you after October 18, 2011.
Nationwide Operation Deceptively Threatened Consumers with Criminal Prosecution and Jail Time for Writing Bounced Checks
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against a nationwide debt collection operation and its chief executive officer for using deceptive threats of criminal prosecution and jail time in order to intimidate consumers into paying debts for bounced checks. The company also misled consumers into believing that they must enroll in a costly financial education program to avoid criminal charges. The proposed order, if approved by a federal district court, would put an end to the illegal activities, impose a civil money penalty of $50,000, and require new consumer disclosures and stronger oversight of the bounced check program.
“National Corrective Group masqueraded as prosecutors and used deceptive tactics to intimidate consumers into paying hundreds of dollars in extra fees to avoid potential criminal prosecution,” said CFPB Director Richard Cordray. “Today we are taking action to put a stop to these illegal debt collection practices.”
The CFPB’s proposed order names National Corrective Group, a privately-held, California-based corporation that operates nationwide and specializes in the collection of consumer debt for bounced checks. The order also includes several related entities that purchased all of the contracts and assets of National Corrective Group and took over its operation during the course of the CFPB investigation. These companies are Victim Services Inc. and American Justice Solutions, Inc. Together, these companies operate one of the largest bad check diversion programs in the United States. Mats Jonsson, National Corrective Group’s Chief Executive Officer, is the senior company executive in charge of the daily operations of its bad check diversion programs and continues to operate Victim Services Inc. and American Justice Solutions, Inc.
State and district attorneys’ offices often offer diversion programs to people accused of writing bad checks as a way for the individuals to avoid criminal prosecution. Many bad check diversion programs are run by companies that enter into contracts with state and local prosecutors’ offices to collect bounced check debt. Under the law, a company operating a bad check diversion program cannot contact a consumer about the program until a prosecutor’s office has reviewed the case and determined the consumer is eligible. The law also requires these companies to inform consumers of certain rights, including their right to dispute allegations of bad check violations.
The CFPB alleges that National Corrective Group deceived consumers by sending them notices on prosecutors’ letterheads and creating the false impression that consumers may be prosecuted for writing bounced checks. However, the letters went to consumers before any district attorney had determined prosecution was likely. Consumers were told by the company that to qualify for the diversion program and avoid prosecution they must pay the bounced check debts as well as enroll in the company’s financial education class for an additional fee. The cost of the financial education classes were typically around $200, which was often several times the amount of the alleged bad check debt.
Specific violations alleged in the CFPB’s complaint include:
- Masquerading as state or district attorneys: The CFPB complaint alleges that the National Corrective Group created a false impression for consumers that its communications were from a state or district attorney’s office. The company sent letters on prosecutors’ letterheads that appeared to be signed by the state or district attorney. The telephone numbers and mailing addresses that the company provided to consumers linked directly to its corporate offices, even though the letters indicated that the consumer would be contacting the district attorney’s office.
- Intimidating consumers with false threats of criminal charges: Under the law, government prosecutors must make the determination to pursue a potential bad check violation. The Bureau alleges that National Corrective Group sent collection letters to consumers on prosecutors’ letterheads threatening criminal prosecution before district or state attorneys had even examined whether a criminal violation may have occurred, and whether participation in the diversion program was appropriate. In fact, the CFPB alleges that less than one percent of consumers who received final warning letters stating that their case was being forwarded for possible criminal prosecution were ever even referred to the prosecutor’s office for possible prosecution. The Bureau alleges that the company also threatened possible criminal prosecution where the amount of the debt was so low that criminal action would rarely or never occur.
- Deceiving consumers into paying extra fees for costly financial education class: According to the Bureau’s complaint, the National Corrective Group deceived consumers into believing that they must pay to enroll in a financial education class in order to avoid possible criminal prosecution for writing a bad check. In reality, consumers are not typically at risk of prosecution, which rarely, if ever, occurs.
The CFPB alleged that the defendants violated the Fair Debt Collection Practices Act (FDCPA). Among other things, the FDCPA prohibits making misrepresentations to or deceiving consumers. The CFPB also alleged that the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits deceptive acts or practices in the consumer financial marketplace. If entered by the court, today’s order would:
- End deceptive communications to consumers: The order would prohibit the companies from stating or implying that they are a state or district attorney. The order would also require that the companies clearly disclose the company name in communications with consumers.
- Prohibit threats of imprisonment and other intimidation tactics: The order would require that the companies stop falsely representing to consumers that failure to pay a debt or enter the bad check diversion program will result in arrest or imprisonment. It would also require the companies to disclose to consumers that the prosecutor’s office has not made a decision about whether to charge the consumer with a crime and that many cases are never prosecuted.
- Prohibit use of district attorney letterhead: The order would ban the companies from using district attorneys’ letterheads or duplicating their signatures for their communications to consumers. The operation would also be required to clearly state that the diversion program is voluntary.
- Require increased program oversight: The order would prohibit companies from contacting consumers about a diversion program unless the operation is under the supervision of a state or district attorney’s office and the office has reviewed and provided written confirmation to the company that there is reason to believe the individual being contacted violated the law.
- Pay a $50,000 civil money penalty: The proposed order requires the companies and Jonsson to pay a $50,000 civil penalty. The poor financial condition of the companies and Jonsson make them unable to pay a greater sum.
The CFPB complaint is available here:http://files.consumerfinance.gov/f/201503_cfpb_complaint-national-corrective-group.pdf
The proposed order is available here:http://files.consumerfinance.gov/f/201503_cfpb_proposed-order-national-corrective-group.pdf
The Bureau’s complaints and consent orders are not findings or rulings that the defendant has actually violated the law.