%1

Billions of dollars in stimulus payments are being sent to Americans, and that makes them a target for fraudsters, the Washington Post reported. Coronavirus-related cons have given crooks another way into people’s bank accounts, Rebecca Kelly Slaughter, whom President Biden named acting chair of the Federal Trade Commission, said in an interview with the Washington Post “People are desperate,” Slaughter said. “They are struggling financially. They’re worried about their health. They’re dealing with child-care issues. And that’s why it’s great that the money is coming, but bad guys are seeing that desperation, too, and are taking advantage of it as they do. We’re just looking out for people who are trying to take advantage of that stimulus money and other related programs.” The FTC received nearly 2.2 million consumer fraud reports last year, up almost 27 percent from the year before, including a surge of online shopping complaints in the early days of the pandemic. Consumers reported losing more than $3.3 billion to fraud, up from $1.8 billion a year earlier. Last year, the FTC introduced ReportFraud.ftc.gov, an updated platform for consumers to file fraud complaints. The FTC is seeing scams involving personal protective equipment (PPE). The agency has also pursued schemes involving the Paycheck Protection Program (PPP), which provides money to businesses to help them make payroll during the pandemic. Tucked in the third round of stimulus aid, largely unnoticed, was $30.4 million allocated to the FTC to fight not just the old consumer scams but also new schemes with a pandemic twist. Under the American Rescue Plan, signed by Biden on March 11, $24 million went to fund full-time employees at the FTC to address unfair or deceptive acts or practices, including those related to the coronavirus. An additional $4.4 million would go to process and monitor consumer complaints received by the FTC’s Consumer Sentinel Network, including increased complaints about schemes related to the pandemic, and $2 million for consumer-related education to help consumers avoid coronavirus scams.

Predatory debt collectors would be barred from collecting any more money from the federal government’s Paycheck Protection Program under recently proposed U.S. legislation, the Washington Post reported. Rep. Suzanne Bonamici (D-Ore.) and Rep. Marie Newman (D-Ill.) introduced the measure last week, arguing that during the pandemic, abusive collectors had harassed consumers and that such firms should not be eligible for the federal relief. Their proposal would block firms that have violated federal debt collection laws from receiving the forgivable loans. The $670 billion Paycheck Protection Program offers forgivable loans of up to $10 million to small businesses. From its beginning, disputes have arisen about whether certain businesses should be eligible for the money. Many debt collection firms have thrived during the pandemic and consumer advocates question whether the operations of these firms should be subsidized by the federal government, especially during an economic downturn. According to a Washington Post analysis earlier this year, more than 1,700 debt-collection agencies and related businesses borrowed from the program, totaling more than $520 million in loans. Some of the recipients have been sanctioned previously for harassment or other abusive tactics.

The Consumer Financial Protection Bureau, the watchdog created after the 2008 financial meltdown and largely muzzled in the Trump era, is poised to start barking again. The agency will focus first on enforcing legal protections for distressed renters, student borrowers and others facing growing debt that its previous leadership has been lax about imposing during the pandemic, the Washington Post reported. But the CFPB — which President Biden has tapped 38-year-old Rohit Chopra to lead — is also likely to take an unprecedentedly tough line against industry giants it finds engaging in abusive practices, former agency officials advising the Biden team say. “It’s a matter of ramping back up,” said Richard Cordray, the CFPB’s first director, who stepped down in late 2017. The agency under Trump was “picking at odds and ends. They ramped down, and it’s a matter of changing direction.” That will mark a dramatic turn. Just last year, consumer complaints to the agency rose by 60 percent over 2019, agency data show, setting a new record as the economic crisis wiped out millions of jobs and pushed lower-income Americans to the brink. Yet the relief the agency secured for consumers topped out at less than $700 million, a fraction of the $5.6 billion it collected in 2015, its high watermark. Kathy Kraninger, a Trump appointee who resigned as director of the agency last week at President Biden’s request, signaled the outcome at the start of the pandemic. She said in late March financial companies would not face penalties for violating consumer protections in the Cares Act if they made “good-faith” efforts to comply.

Consumer Financial Protection Bureau (CFPB) Director Kathy Kraninger resigned yesterday at the request of the newly sworn-in President Biden, clearing the way for his nominee to lead the powerful regulatory agency, The Hill reported. Kraninger, a Republican appointed by former President Trump, announced her departure via Twitter roughly an hour after Biden was inaugurated as the 46th U.S. president. “I support the Constitutional prerogative of the President to appoint senior officials within the government who support the President’s policy priorities, which ensures our government is responsive to the will of the people as expressed in presidential elections,” Kraninger wrote. Kraninger was confirmed to lead the CFPB in December 2018 for a term lasting until 2023. She was the second full-time director of the agency, which was created by the 2010 Dodd-Frank Wall Street reform law to oversee how banks, lenders, credit card companies and debt servicers treat their customers. Biden would have been able to fire Kraninger had she not resigned thanks to the Supreme Court’s ruling in a challenge to the CFPB’s constitutionality backed by Kraninger and the Trump administration. The court found the CFPB’s structure unconstitutional in June and resolved the issue by striking down a provision limiting when the president can dismiss the bureau’s director.

President-elect Joe Biden’s pick to lead the Consumer Financial Protection Bureau (CFPB) could temporarily take control of the agency as soon as Inauguration Day thanks to a precedent established by President Trump, The Hill reported. Federal Trade Commissioner Rohit Chopra, whom Biden will nominate to be CFPB director, should be able to step into his role on an acting basis under a law used by Trump to install a temporary chief for the bureau in 2017. Under the Federal Vacancies Reform Act, the president can appoint any official serving in a Senate-confirmed position to a vacant Senate-confirmed role on an acting basis. Trump used the Vacancies Act to nominate Mick Mulvaney, then the director of the Office of Management and Budget, to serve as acting CFPB director in 2017 after the bureau’s former chief Richard Cordray resigned. Then-CFPB Deputy Director Leandra English sued Trump, arguing that he illegally blocked her service as the bureau’s temporary leader. While the Dodd-Frank Act specifies that the CFPB’s deputy director is supposed to lead the agency when it has no Senate-confirmed leader, a federal judge ruled that the Vacancies Act could be used to override that provision. English appealed, but dropped her lawsuit and resigned from the bureau after Trump nominated current CFPB Director Kathy Kraninger in June 2018. Biden is expected to fire Kraninger, a Republican, if she doesn’t resign before he takes office and can do so thanks to another precedent Trump helped set. The Justice Department and CFPB backed a challenge to the agency’s constitutionality that the Supreme Court resolved in June by striking a provision from Dodd-Frank that limits when the president can fire the CFPB director. After Kraninger departs, Biden could then appoint Chopra, who was confirmed to the FTC by the Senate in 2018, as the CFPB’s acting director. However, the Vacancies Reform Act bars a current nominee for that position from serving in an acting capacity, so Biden would be forced to nominate a new acting director when he formally nominates Chopra.

The Consumer Financial Protection Bureau (CFPB) filed a proposed settlement to resolve its December 4, 2020 lawsuit against LendUp Loans, LLC (LendUp) alleging violations of the Military Lending Act (MLA). Yesterday’s action is the first resolution in the Bureau’s broader sweep of investigations of multiple lenders that may be violating the MLA. LendUp, which has its principal place of business in Oakland, California, is an online lender that offers single-payment and installment loans to consumers. If entered by the court, the proposed settlement would require LendUp to provide $300,000 in redress to consumers and to pay a $950,000 civil money penalty. The settlement would also enjoin LendUp from committing future violations of the MLA and from collecting on, selling, or assigning any debts arising from loans that failed to comply with the MLA. It would also require LendUp to correct or update the information it provided to consumer reporting agencies about affected consumers. The MLA puts in place protections in connection with extensions of consumer credit for active-duty servicemembers and their dependents, who are defined as “covered borrowers.” These protections include a maximum allowable annual percentage rate of 36%, known as a Military Annual Percentage Rate (MAPR), a prohibition against required arbitration, and certain mandatory loan disclosures. The Bureau’s complaint, filed in the U.S. District Court for the Northern District of California, alleged that since October 2016, LendUp made over 4,000 single-payment or installment loans to over 1,200 covered borrowers in violation of the MLA. The Bureau specifically alleged that LendUp’s violations of the MLA included extending loans with a MAPR that exceeds the MLA’s 36% cap, extending loans that require borrowers to submit to arbitration, and failing to make certain required loan disclosures, including a statement of the applicable MAPR.

More than 1,800 Paycheck Protection Program loans last year went to debt collectors and high-interest lenders, according to an analysis by the Washington Post. In all, the aid to these firms amounted to more than $580 million. More than 170 of those recipients have been the subject of a multitude of complaints — each racking up at least 100 with the Consumer Financial Protection Bureau (CFPB), according to The Post’s analysis. Twenty-five have been subject to legal enforcement or consumer alerts, many by the CFPB and the Federal Trade Commission.

The Consumer Financial Protection Bureau (CFPB) yesterday issued a consent order against Omni Financial of Nevada, Inc. (Omni). The Bureau found that Omni violated the Military Lending Act (MLA), Electronic Fund Transfer Act (EFTA), and Consumer Financial Protection Act of 2010 (CFPA) in connection with making installment loans, according to a CFPB press release. Omni, which has its principal place of business in Las Vegas, Nevada, and operates using the names Omni Financial and Omni Military Loans, specializes in lending to consumers affiliated with the military. It originates tens of thousands of loans each year, with individual loans typically ranging from $500 to $10,000. The consent order requires that Omni pay a $2.175 million civil money penalty and imposes injunctive relief to stop ongoing violations and prevent future violations. The CFPB found that, since October 2016, Omni’s loans to covered borrowers violated the MLA’s prohibition of requiring repayment by allotment. The CFPB also found that Omni violated EFTA and the CFPA. In addition to lending to active-duty servicemembers and their dependents, Omni lends to civilians and non-covered servicemembers, such as military retirees. The Bureau found that Omni requires all of its borrowers to provide bank-account information and authorize Omni to withdraw funds from that account on the first business day after each missed payment. Omni’s requirement that consumers allow it to withdraw funds from their bank accounts violates EFTA’s prohibition against requiring consumers to preauthorize electronic fund transfers as a condition of receiving credit. The CFPB further found that these EFTA violations constituted CFPA violations.

The Federal Trade Commission recently took action against a Missouri collection company and its owners, alleging that they collected more than $24 million from consumers, largely by placing “bogus or highly questionable” debts on their credit reports, the New York Times reported. “The defendants used this illegal ‘debt parking’ to coerce people to pay debts they didn’t owe or didn’t recognize,” Andrew Smith, director of the FTC’s bureau of consumer protection, said in prepared remarks about the agency’s settlement with the company, Midwest Recovery Systems. The FTC said in a related blog post that the case was its first legal challenge to debt parking under the Fair Debt Collection Practices Act. In debt parking cases, collectors don’t contact the consumer before reporting the debt to credit bureaus. That means people learn about the debt only when it is flagged as they are applying for a mortgage or a car loan or even a job. Because they don’t want to lose the loan or the job offer, consumers may feel pressured to pay off the “bad” debt quickly. Midwest Recovery received thousands of complaints from consumers each month, the FTC’s complaint said. When the company itself investigated the complaints, it found that as many as 97 percent of the debts were inaccurate or not valid, the agency said.