Top Story Lending Related

The Federal Trade Commission has announced it has stopped a scheme that allegedly bilked millions of dollars out of consumers burdened with student loan debt by pretending to be affiliated with the U.S. Department of Education in violation of the FTC’s Impersonation Rule, collecting illegal advance fees, and making other deceptive claims. A federal court temporarily halted the scheme and froze its assets at the request of the Commission.

According to the FTC’s complaint, since at least January 2023, Nevada-based Superior Servicing, LLC and its operator Dennise Merdjanian made telemarketing calls and sent personalized mailers to borrowers falsely claiming that consumers enrolled in defendants’ program could obtain benefits such as loan consolidation, reduced interest rates on their student loans, reduced monthly student loan payments, or loan forgiveness. The operators collected illegal advance fees of up to $899 as an initial payment followed by monthly payments that defendants falsely represented were going towards consumers’ student loan debt.

To convince borrowers that their claims were legitimate, the operators allegedly pretended to “work with” or be affiliated with the Department of Education or its approved loan servicers and, in some instances, even advised consumers to stop making payments to their existing loan servicers. The operators then falsely claimed that they would take over responsibility for servicing consumers’ loans, collect monthly student loan payments for a term of up to 20 years, and said that upon completion of those monthly payments, the consumers’ federal student loan debt would be forgiven. Contrary to Superior Servicing’s false promises, borrowers have reported that they never received loan consolidation, lowered payments, or loan forgiveness, according to the complaint. The FTC noted that at most, and if anything at all, the defendants filled out simple applications for debt relief that are available for free from the Department of Education.

The FTC charged that the scheme’s operators violated the Impersonation Rule by claiming to be affiliated with the Department of Education, as well as the FTC Act’s prohibition on deceptive practices, the Telemarketing Sales Rule, and the Gramm-Leach-Bliley Act.

The CFPB has announced an advance notice of proposed rulemaking (ANPR) to gather additional public input on potential amendments to Regulation V, which implements the Fair Credit Reporting Act (FCRA). After gathering public comment, the CFPB intends to issue a proposed rule concerning "coerced debt."

The ANPR asks consumer advocates, credit reporting companies, and the public to comment on:

• The prevalence and extent of harms to people with coerced debt, including through the credit reporting system.
• Evidence regarding the relevance of coerced debt to a survivor’s credit risk.
• Barriers to accessing existing protections under federal or state law for survivors of economic abuse.
• Challenges resulting from coerced debt facing specific populations including survivors of intimate partner violence and gender-based violence, older Americans, and children in foster care.
• Potential documentation or self-attestation requirements for showing that a person’s debt was coerced.

The proposed rulemaking is in response to a petition for rulemaking submitted by the National Consumer Law Center and the Center for Survivor Agency and Justice. Comments will be accepted through March 7, 2025.

• Publication update: Published at 89 FR 100922 on 12/13/2024.

The CFPB has announced it has issued a consent order against Performant Recovery, Inc., a California corporation headquartered in Plantation, Florida, that collected on student loan debt, including from borrowers who had defaulted on Federal Family Education Loan Program (FFELP) loans.

FFELP borrowers who have defaulted have a one-time right to rehabilitate their loans and bring them back into good standing by entering into an agreement and making a series of reasonable and affordable payments. If borrowers entered into loan rehabilitation agreements within 65 days of default, the loan holders did not charge the borrowers collection costs for the rehabilitations and also did not typically pay debt collection agencies any fees for these rehabilitations. However, the Bureau found that, between 2015-2020, Performant used its control over the rehabilitation process to delay borrowers’ loan rehabilitations beyond 65 days so that these borrowers would incur collection costs and Performant would generate fees for itself.

The Bureau found that, when borrowers called Performant with 65 days of default, the company routed these borrowers to specialized agents, who were told by managers that “the objective is to delay as much as possible without getting Performant in trouble.” Instead of filling out rehabilitation forms over the phone as they did with other borrowers, agents told these borrowers that they would need to receive blank forms by postal mail, and typically did not use email, fax, or other methods. Performant agents held up these borrowers’ rehabilitations at every stage. As a manager explained to agents, “[W]e want them to mail all documents. Remember the whole objective is to DELAY, DELAY, DELAY.”

The CFPB's order requires Performant to:

• Stop servicing and collecting on student loans
• Pay a $700,000 penalty to the CFPB’s victims relief fund. The payment will make it possible for the CFPB to potentially use the fund to fully redress borrowers harmed by Performant’s illegal conduct.
  

Records in the Federal Reserve Board's Community Reinvestment Act evaluations archives show that the Reserve Banks made public 18 evaluations in November. A bank in Harrogate, Tennessee, received a rating of Needs to improve. Thirteen banks received Satisfactory ratings. We congratulate four banks whose evaluations were rated Outstanding:

• 1st Source Bank, South Bend, Indiana
• Commercial and Savings Bank of Millersburg, Ohio, Millersburg, Ohio
• Fall River Five Cents Savings Bank, Fall River, Massachusetts
• Tristate Capital Bank, Pittsburgh, Pennsylvania

The Department of Housing and Urban Development has announced that the Federal Housing Administration is extending through April 11, 2025, its foreclosure moratoriums for FHA-insured Single Family Title II forward and Home Equity Conversion Mortgages in Presidentially Declared Major Disaster Areas (PDMDAs) declared as a result of this past summer’s Hurricanes Helene and Milton. This extension provides borrowers affected by these catastrophic events with additional time to access federal, state, or local housing resources; to consult with a HUD-approved housing counselor; and/or to rebuild their homes.

FHA is extending the foreclosure moratoriums for all Hurricanes Helene and Milton PDMDAs, regardless of their declaration date, through April 11, 2025. FHA is also extending the deadline dates for servicers to perform certain legal actions related to foreclosure for an additional 180 days following the end of the foreclosure moratoriums.

On Friday, the Financial Stability Oversight Council unanimously approved its 2024 annual report, which reviews developments in financial markets, identifies vulnerabilities and emerging threats to U.S. financial stability, and makes recommendations to mitigate those vulnerabilities and threats. The report also details the activities of the Council and summarizes significant regulatory developments. The report was developed collaboratively by Council members and their agencies and staffs. Overall, the Council finds that the U.S. financial system remains resilient, though vulnerabilities warrant ongoing vigilance.

The report made recommendations in the following areas:

• Cybersecurity
• Depository institutions
• Third-party service providers
• Commercial real estate credit risk
• Digital assets
• Investment funds

The Appraisal Subcommittee (ASC) of the Federal Financial Institutions Examination Council (FFIEC) published in today's Federal Register a notice of proposed rulemaking to implement a framework to govern the ASC’s enforcement authority regarding the effectiveness of Appraiser and Appraisal Management Company (AMC) Programs overseen by State Appraiser Regulatory Agencies. The proposed rule would codify the existing compliance review process with modifications. The proposed rule would require an analysis to assess program effectiveness, outline requirements for maintaining effective programs, and authorize the ASC to bring enforcement actions against such agencies that fail to maintain effective programs.

Comments on the proposal will be accepted through February 4, 2025.

The CFPB yesterday announced it is distributing $1.8 billion to 4.3 million consumers charged illegal advance fees or subjected to allegedly deceptive bait-and-switch advertising by a group of credit repair companies including Lexington Law and CreditRepair.com. Together, the payments constitute the largest-ever distribution from the CFPB’s victims relief fund, which is funded by civil penalties paid by companies that violate consumer protection laws.

In August 2023, the CFPB secured a legal judgment against the credit repair conglomerate, after a district court ruled that the companies had violated the Telemarketing Sales Rule’s advance fee prohibition. Under federal law, credit repair companies that engage in telemarketing cannot collect fees until they provide documentation showing they have achieved the promised results for consumers, at least six months after the results were achieved.

Following the district court’s ruling, the companies filed for Chapter 11 bankruptcy protection, shuttering approximately 80 percent of their business operations, including their telemarketing call centers. The CFPB’s $1.8 billion distribution to consumers harmed by the credit repair companies is a result of the agency’s enforcement action.

• CFPB 12/5/2024 Blog article for affected consumers: "CreditRepair.com and Lexington Law refund checks: What you need to know"

The CFPB has reported it has taken action against student lender Climb Credit and its investors, including 1/0 (“One Zero”), filing a proposed final judgment and order that, if entered by the court, will require the companies to stop making representations in their advertising about the quality of the training programs at their partner schools and graduates’ hiring rates and salaries.

The CFPB sued Climb Credit in October 2024 [see earlier Top Story] for offering loans for educational programs that often were not vetted for quality and job placement success or that failed the vetting, despite Climb Credit making representations to the contrary. The CFPB's complaint also names wholly owned subsidiaries Climb Investco and Climb GS Loan Fund. If entered, the final judgment and order will require the defendants to stop making certain representations about their educational offerings in their advertising and pay a $950,000 civil money penalty into the CFPB’s victims relief fund. A judgment for redress of $6.618 million will be suspended based on a demonstrated inability to pay.

Yesterday, the Federal Reserve Board, CFPB, FDIC, OCC, FinCEN, NCUA and state financial regulators issued a joint press release to announce a joint Statement on Elder Financial Exploitation.

The eleven-page Statement provides supervised institutions with examples of risk management and other practices that may be effective in combating such exploitation.

• FDIC FIL-83-2024
• OCC Bulletin 2024-34