CFPB ORDERS TRANSUNION AND EQUIFAX TO PAY $23.1 MILLION FOR DECEIVING CONSUMERS

On Jan. 3, the the Consumer Financial Protection Bureau (CFPB) took action against Equifax, Inc., TransUnion, and their subsidiaries for deceiving consumers about the usefulness and actual cost of credit scores they sold to consumers. The companies also lured consumers into costly recurring payments for credit-related products with false promises. The CFPB ordered TransUnion and Equifax to truthfully represent the value of the credit scores they provide and the cost of obtaining those credit scores and other services. Additionally, TransUnion and Equifax must pay a total of more than $17.6 million in restitution to consumers, and fines totaling $5.5 million to the CFPB.

“TransUnion and Equifax deceived consumers about the usefulness of the credit scores they marketed, and lured consumers into expensive recurring payments with false promises,” said CFPB Director Richard Cordray. “Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them.”

Consumers are again advised to be aware of the terms when they sign up to receive a credit score or other credit-related products.  All credit reports are not free, and credit scores are generally not provided free of charge directly from these companies.  However, some credit card companies to provide scores to their customers without charge, and thus consumers would be wise to ask their credit card companies if they provide such information for free.

CFPB warnings regarding college-sponsored accounts

By: Amy
Today, the Consumer Financial Protection Bureau (CFPB) released a report raising new concerns about costly fees and risky features often related to certain college-sponsored accounts. The Bureau’s analysis of roughly 500 marketing deals between these schools and large banks found that many deals allow for risky features that can lead students to rack up hundreds of dollars in fees per year. The report also examines trends in the school-sponsored credit card market.  The campus banking report is available at: http://files.consumerfinance.gov/f/documents/201612_cfpb_StudentBankingReport2016.pdf

Notably, some of the nation’s largest colleges and universities continue to maintain deals with large banks that allow for the marketing of products that may not be in the best financial interests of their students and that contain costly features.  Key findings from the Bureau’s report and analysis of college marketing deals for prepaid and debit accounts include:

  • Dozens of bank deals with colleges fail to limit costly fees:  The Bureau found that dozens of deals with banks for school-sponsored accounts, including deals at some of the nation’s largest colleges and universities, do not place limits on account fees, such as overdraft fees, out-of-network ATM fees, or other common charges. These costly fees remain a concern at dozens of campuses, even as safer and more affordable alternatives are widely available at many other schools across the county.
  • Some students may pay hundreds of dollars per year in overdraft fees: College students may pay hundreds per year in overdraft fees when using student banking products. This is particularly concerning given that a growing body of evidence suggests that small financial shocks—such as a few hundred dollars— can cause significant financial hardship for students and even deter college completion. Further, the Bureau’s analysis found that fees associated with school-sponsored accounts can collectively cost a college student body hundreds of thousands of dollars per year.
  • Deals provide financial benefits for banks and schools but offer few, if any, financial benefits for students: The Bureau found marketing agreements between colleges and banks often contain extensive details about how the school and the bank can profit. Contracts frequently include details on revenue sharing and other payments made in exchange for exclusive marketing access to colleges’ student population. At the same time, many of these agreements do not require banks to offer safe and affordable accounts—and may drive students to high-cost products.
  • Some schools fail to disclose key details of marketing deals with banks: Most colleges were required by the Department of Education to publicly disclose marketing contracts by Sept. 1, 2016. However, the CFPB found that some agreements publicly announced by banks or colleges were not included in the Department of Education’s public database of agreements, suggesting that some schools did not submit their agreements to the Department before the agency’s disclosure website launched.

This is a good time to remind readers that the CFPB published a Safe Student Account Toolkit to help colleges evaluate whether to co-sponsor a prepaid or checking account with a financial institution. The Safe Student Account Toolkit is available at: http://files.consumerfinance.gov/f/201512_cfpb_safe-student-account-toolkit.pdf 

New Used Car Disclosure Rules

/ November 15, 2016

On November 10, the FTC issued new rules regarding used car sales.  See 16 CFR 455.

The new rule improves disclosures for service contracts and unexpired manufacturer warranties, increases Spanish language disclosure information, and adds air bags and catalytic converters to the sticker’s list of major defects that can occur.  The rule also changes the language on the sticker describing an “as is” sale. The old language merely stated that “[t]he dealer assumes no responsibility for any repairs regardless of any oral statements about the vehicle.” The language the FTC initially proposed in its new rule as a replacement would have been even more unclear: “The dealer is not responsible for any repairs, regardless of what anybody tells you.” After opposition from consumer groups, the language is now changed to “The dealer does not provide a warranty for any repairs after sale.” Since the Rule prohibits the dealer from making an “as is” disclosure when there is a warranty under state law, this is an accurate statement.

Nonetheless, there are various ways to challenge an “as is” disclaimer.  For example:

  • 1. A car sold “as is” still has a warranty of good title–that the transfer is rightful, and that the car is delivered free from liens–unless excluded by specific language or by circumstances that give the buyer reason to know that the seller may not have clear title.
  • 2. Express warranties generally cannot be disclaimed.
  • 3. Federal law provides that a dealer that “makes any written warranty” or “enters into a service contract” cannot sell a car “as is.”
  • 4. Many states have used car lemon laws that may limit “as is” sales and provide strong consumer remedies. States also may have minimum standards for used cars.
  • 5. State vehicle inspection laws also may provide a remedy even in an “as is” sale where the vehicle does not pass inspection.
  • 6. State deceptive trade practices statutes apply to oral or written misrepresentations or the failure to disclose defects or a wreck, flood, or other salvage history, even where a vehicle is sold “as is.”
  • 7. The federal odometer statute, including $10,000 minimum damages and attorney fees applies, despite the “as is” sale, to odometer misrepresentations, mis-disclosures or tampering.
  • 8.  There are also common law fraud and other claims that may assist a consumer stuck with a faulty vehicle.

Rules Prohibiting Schools’ Use of Mandatory Arbitration Agreements

By: Amy

On October 28, the Department of Education issued final regulations intended to protect student loan borrowers against school closures and fraud.  To that end, the rules include significant provisions restricting school arbitration agreements; clarifying student rights to raise school fraud as a defense to loan repayment; providing automatic closed school loan discharges to certain eligible borrowers; and providing new rights for students to obtain false certification loan discharges.  See https://www.gpo.gov/fdsys/pkg/FR-2016-11-01/pdf/2016-25448.pdf.  Although some provisions are likely to face legal challenge, the rules generally will be effective July 1, 2017.

For those in the dispute resolution community, the  provisions that may be of most interest are those limiting school arbitration and class-waiver requirements.  This came in the wake of some institutions, such as Corinthian Colleges, using class action waivers and arbitration clauses to thwart actions by students for fraudulent and abusive conduct that largely pushed students into financial peril.  The new rules prohibit schools participating in the federal student loan program from entering into pre-dispute arbitration agreements with students or agreements that purport to waive students’ rights to bring class actions.  These limitations apply to agreements with students who have obtained Federal Direct Loans or benefited from Direct Parent PLUS Loans, and apply to claims regarding the making of the Federal Direct Loan or the provision of educational services for which the loan was obtained.  This bars schools from using contract clauses or stand-alone pre-dispute agreements with students that waive students’ right to go to court or to pursue a class action over any claims that could also give rise to a “borrower defense” claim (described more fully in the new rules).  The provisions also bar a school from relying on an existing pre-dispute arbitration agreement or other agreement to force an individual or class action out of court.  This includes agreements entered into prior to the rule’s effective date.  The school must either amend the agreement or notify the students that they will not enforce the agreement.

The rules also aim to increase transparency regarding such “borrower defense” related arbitration and litigation.  If schools do engage in arbitration proceedings in a manner that is consistent with the regulations and applicable law, the rules require that these schools notify the Secretary of Education and provide disclosures.  The rules similarly require that schools disclose such judicial filings and dispositions.

The complete provisions are lengthy, and can be reviewed in the PDF linked above from 75926 Federal Register/Vol. 81, No. 211/Tuesday, November 1, 2016/Rules and Regulations.

Meanwhile, we wait for the Consumer Financial Protection Bureau (CFPB) to issue final regulations regarding its proposal to prohibit companies from including pre-dispute arbitration clauses in agreements regarding financial products or services that prevent class action lawsuits. The proposal would open up the legal system to consumers so they could file a class action or join a class action when someone else files it. Although the proposal would allow companies to include arbitration clauses in their contracts, it would require that the clauses would have to say explicitly that they cannot be used to stop consumers from being part of a class action in court.

A Basic Guide to Understanding Missouri Payday Loans for the Missouri Consumer

 

In 2003, Elliot Clark took out five short-term loans of $500 from payday lenders in Kansas City so he could keep up with the bills his security job simply could not cover. Clark juggled the five loans for five years, paying off a $500 loan and interest using loans he took from another payday lender. Clark ultimately received disability payments from Veterans Affairs and Social Security, and he was able to repay the debt. The interest Clark paid on the original $2500: more than $50,000.

Clark is not alone. Twelve million American adults use payday loans annually. In Missouri, borrowers received 1.87 million payday loans between October 2013 and September 2014. The average loan in Missouri during this time period was $309.64, with an interest/fee of $53.67 for a 14-day loan. The resulting average interest rate was approximately 452%.

So, how do we as Missouri consumers navigate the world of payday loans and short-term lending? This post answers: (1) how does Missouri define payday loans and (2) what traps should I avoid as a consumer of such loans?

What is a payday loan?

A payday loan is an unsecured small dollar, short-term loan. The name of the loan derives from the loan period; the typical duration of a payday loan matches the borrower’s payment schedule. In Missouri, a borrower can obtain a loan for up to $500. An initial interest rate can be set for up to 75%. The loan must be repaid 14 to 31 daysafter the borrower receives the loan.

A borrower may “renew,” or rollover the loan for an additional 14 to 31 days. To renew a loan, a borrower must:

  • Make a written request to the lender
  • Pay 5% of the principal amount of the loan
  • Make a payment on interest and fees due at the time of renewal

The lender can also charge up to 75% in interest rate for each renewal. A borrower in Missouri can renew the loan up to 6 times.

What traps should I, the consumer, avoid?

  • Do not underestimate the extremely high interest rate: A lender can charge an interest rate of 75% on the initial loan. During each renewal period, that interest rate stays the same. As mentioned above, the average annual percentage rate for a payday loan in Missouri is 452%, and with high annual percentage rates reaching 800%.
  • Do not take the full amount offered: Payday lenders will frequently attempt to persuade consumers to take the full $500 loan, when a borrower only needs a fraction of that amount. Take only the amount you need to cover the immediate expenses. The extra $100 you borrow can become over $1000 that you must pay back.
  • Do not be embarrassed to ask for help in understanding the contract terms: Loan language can be confusing, especially as special terms used in loan contracts are not used in everyday language. If you do not understand what annual percentage rate, renewal, or principal are, ask the employee. Make the employee explain exactly how the loan will work – go through how much you will owe at the end of the term, how much money will be owed if renew the loan, and how much interest will be paid on each loan. It is better to understand what you contract into before you sign then to be surprised in two weeks with a larger debt than you expected.
  • Do not renew a payday loan: Lenders make money by collecting on interest on renewal loans. Because Missouri allows interest rates up to 75% per renewal, your interest owed will quickly become larger than the amount you originally took out. As mentioned earlier, only take out the amount you need and can afford to pay back!
  • Do not take out loans from multiple locations: While it is tempting to take out a second loan from a second lender to pay the interest off a second loan, this leads to further debt. While law does not allow this type of lending, it still occurs in Missouri payday loan practice. Like Clark, borrowers become stuck juggling multiple loans and increasing interest.

Alarmingly, the Missouri laws regulating payday loans are confusing and unclear. More terrifying is the lack of guidance Missouri consumers face in navigating the maze of payday statutes. The Missouri Attorney General’s office currently does not produce a guide to short-term loans (like it does in other areas of law, such as Landlord/Tenant). The Missouri Department of Finance provides an explanation as murky and bewildering as the statute it attempts to interpret.

Ultimately, Missouri consumers must be extremely careful when taking out payday loans. The best policy individual consumers regarding payday loans may be to simply avoid at all costs.

**I would like to recognize Michael Carney, staff attorney at Mid-Missouri Legal Services, for his help in researching and understanding the Missouri statutes applicable to payday loans.

How to Avoid Defaulting on your Federal Student Loans

By: Mercedes Pineda 

Recent reports by the Wall Street Journal estimate more than 40% of federal student loan borrowers are not making payments or are behind on their payments. Defaulting on a loan can carry serious consequences, such as: lowering your credit rating, preventing you from buying a house or car, making it difficult rent an apartment, or even getting a cell phone contract. Additionally, the cost of your loan increases because of additional fees and it becomes payable immediately. All of the institutions can take measures to against you to recover the debt, including your school, lender, and federal government. This post aims to help you avoid the pains of default.

First, a few definitions are helpful to understand the default process. A loan is “delinquent” when loan payments are not received by the due dates. Your loan becomes delinquent the first day after you miss a payment and will continue until all payments are made to bring the loan current. (Source: Studentaid.ed.gov). Loan servicers report all delinquencies of at least 90 days to credit bureaus. “Default” happens when you fail to make a monthly payment for 270 days.

So, what steps can you take to avoid defaulting on your federal student loans?

1) Take the time to understand your loan agreement and the loans you receive. This includes reading your promissory note, which is a legal document where you agree to repay the loan according to its terms. This also includes learning the costs of getting your loan, the interest rate, and the repayment terms. You must repay all the loans you receive, even if you do not complete the educational program. A helpful guide in understanding your loans can be found on the Consumer Financial Protection Bureau site: http://www.consumerfinance.gov/students/knowbeforeyouowe/.

2) Manage your borrowing. Students often accept the full amount of loans offered in their school’s financial aid package. However, students should create a budget before accepting their loans in order to figure out how much money they actually need to borrow. Students can then request a lower loan amount via their school’s financial aid office. The student can always increase this amount later if they decide they need the additional funds. Students should also complete financial awareness counseling: https://studentloans.gov/myDirectLoan/counselingInstructions.action.

3) Track your loans online. Keep track of all your loans via: https://studentaid.ed.gov.

4) Keep good records. It is really easy to misplace important loan documents (especially when you don’t need to look at them for years). You should keep the following documents in easy to find file:

  • Financial aid award letters;
  • Loan counseling materials;
  • Promissory notes;
  • Amount of all student loans you borrow;
  • Loan servicer contact information;
  • Loan disclosures;
  • Payment schedules;
  • Record of your monthly payments;
  • Any communications you have with your servicer;
  • Deferment or forbearance paperwork; and
  • Documentation that you paid your loan in full.

Although it is possible to track down this information several years after receiving loans, it is a difficult, time-consuming process and not always successful.

5) Notify your loan servicer. Your loan servicer manages your loan and processes payments. It is really important to talk to your loan servicers whenever any of the following situations happen:

  • You need help making your monthly payments;
  • You graduate;
  • You withdraw from school;
  • You drop below half-time enrollment status at school;
  • You change your name, address, or social security number;
  • You transfer to another school; or
  • You experience a change in your life that might impact your loan payments.

You can work with your loan servicer to pick the best repayment plan for you when any of these events happen. If you do not contact your loan servicer, you run the risk of missing payments and ultimately default. Never ignore delinquency or default notices from your loan servicer! You are much better off working with your servicer to out the best plan of action.

Medical Tourism: What to Know and Risks to be Aware of

By: Ian Marable 

Traveling to other countries to get treatments or surgeries not fully covered here by your insurance or health plan may seem like a good idea that can potentially save you money. And in some cases it can be. However, before making that big decision it’s important to know the risks.

Know the Regulations of the Country you’re Seeking Treatment in

Many countries have different health regulations than the United States. For example, doctors in the United States have to go through extensive training and testing in order to get a license to practice medicine, in order to meet the high standards of care provided here. However, other countries such as India and Sri Lanka, don’t require the same licensing or testing procedures and as a result often may not be able to provide the same level of care as here in the United States. If you decide to seek treatment in another country make sure to know the required training, background and testing required of someone before allowing them to treat you.

Additionally, know the country’s competency evaluations procedures. Competency evaluations, in which doctors are examined for their performances on whether they’ll be able to continue to practice, are relatively strict in the United States. Other countries, however, may differ on and be less strict on who can continue to practice medicine after a less than adequate performance.  You should be careful to know these procedures of other countries to make sure you won’t get an inadequate doctor or one who has botched procedures in the past.

Finally, if privacy of your medical records is a concern check the country’s laws to make sure they do an adequate job of keeping your records private. Here in the United States HIPAA, maintains privacy over your health records, but other countries’ regulations may not do so.

Medical Malpractice Regulations

It’s also important to know the country’s medical malpractice regulations if something goes wrong, so you or your family can be compensated. Here in the United States patients can sue for compensation when doctors procedures harm them and that harm was due to them practicing outside of the standard of care. Some countries, however, do not even have malpractice regulations. If this is a concern for you, make sure to check the country’s medical malpractice regulations before  seeking treatment there.

Success and mortality rates

The next and most obvious thing to know, if available, is that country’s success and mortality rates. For obvious reasons, this can be important in evaluating whether you want to seek treatment in that country. 

Cleanliness of the Hospital

Finally, an important consideration is the cleanliness of the hospital. Many countries such as Mexico have had problems with anti-bacterial resistant infections Check for reports on how clearn certain hospitals are before deciding to seek

When is a Landlord Allowed to Enter Your Home?

By: jjrbennett 

When is a Landlord Allowed to Enter Your Home?

What Does the Law Say?

Unfortunately in Colorado there is not many protections for a tenant’s privacy in relation to their landlord. Boulder County and City, along with the State of Colorado, have no statutory language for tenant privacy. However there is an implied covenant of quiet enjoyment that is written into every lease.

The Duty of Quiet Enjoyment

Colorado case law provides that a landlord cannot violate the duty of quiet enjoyment. This duty is defined generally to be “a covenant that promises that the grantee or tenant of an estate in real property will be able to possess the premises in peace, without disturbance by hostile claimants.” This covenant protects tenants rights in principle, yet enforcement is difficult. There are also many legitimate reasons for landlords to come in and inspect the premises.

When Can a Landlord Enter the Premises? 

A tenant’s right to privacy is almost entirely subject to the lease. Whatever protections you wish to have relating to your privacy must be negotiated with your landlord at signing.

According to the standard Boulder Housing Lease, a landlord may enter their tenant’s premises, without notice, to:

  • Inspect the residence
  • Repair damage
  • Or show the premises to prospective buyers

The specific language in the Boulder Model Lease is laid out below

“Resident shall permit owner/agent to enter the premises at reasonable times and upon reasonable notice for the purpose of making necessary or convenient repairs or reasonable inspections, or to show the premises to prospective residents, purchasers, or lenders. Entry may be made without prior notice only if owner/agent reasonably believes that an emergency exists, such as a fire or broken water pipe, or that the premises have been abandoned.”

Link: http://ocss.colorado.edu/sites/default/files/imce/BoulderModelLease.pdf

What about the Boulder Housing Code?

The Boulder Housing Code does require that entry be permitted for reasonable repairs which relate to the Code. Therefore, whatever language you negotiate with your landlord for privacy cannot violate this code.

Link: https://bouldercolorado.gov/plan-develop/codes-and-regulations

What Else Can I Do If a Landlord Continues to Invade My Privacy? 

First and foremost, you should attempt to resolve the problem by negotiating with your landlord. This is the easiest and most hassle-free way to resolve all landlord-tenant disputes. Perhaps starting with a tactful letter may be the best way to go.

If negotiations break down, then it is time to consult an attorney or request mediation. Mediation services in the City of Boulder can be found here:

https://bouldercolorado.gov/community-relations/mediation-program

Finally, DO NOT deny entry of your home to your landlord. If your landlord has similar language in your lease as in the Boulder Model Lease above, then your landlord can immediately start eviction proceedings against you.

Conclusion

I hope this is helpful! Best of luck with your future landlord relationships!

-Joshua JR Bennett

What to do when your Bank is data-breached

By Rusty Trevino

It’s an all too common story on the news these days, data-breaches at banks or other institutions that have our personal information, it happens more frequently as technology becomes more integrated into our daily lives. What does it really mean for us, the consumers? Here are a few tips on how to handle the situation.

1. Once you’ve become aware that your bank compromised, don’t be afraid to go down to your local branch (or call whatever hotline phone number that might be available on their website) and ask what accounts or information has been affected and whether they recommend closing and re-opening a new account.

2. Pay attention to any new or unusual notices about new accounts, credit cards, or financial products that you don’t remember applying for. Unusual activity after a data breech could indicate that your information is being used fraudulently.

3. If you’ve been a victim of identity fraud, immediately report to the authorities. The address below can be used to find the specific authorities that need to be contacted, but also to get more information on what to do in case of a data breach.

http://www.stopfraudcolorado.gov/fraud-center/digital-fraud/involved-data-breach

Remember, when you hear about events in the news, it’s your right as a consumer to get the full extent of the incident and how you may be affected. Also, if something does go wrong, don’t panic and go to the website above and follow the links to the information that can help you can everything back on track.

Consumer Choice Legislation And You

By: Dylan Sheji 

Third party data collection is a scary topic, and though you might know what it is and various means to minimize its effects it seems like there is no legal way to stop it. Under current U.S. laws consumers have no right to know which data brokers have their data and what data they have. Some laws and agencies exist that could regulate some behavior, such as the Federal Trade Commission (FTC), but only if companies fail to follow their privacy policies or use fraudulent data collection practices. Is there any reprieve for consumers suffering from run-of-the-mill invasive data collection? Three bills and efforts in the past five years seek to resolve these issues in favor of consumers.

 

“Reclaim Your Name”

At a privacy conference in June of 2013, FTC Commissioner Julie Brown called for an initiative she named “Reclaim Your Name.” The program would make data brokers accountable to consumers by providing a user-friendly online portal where consumers could edit and update their information. This program mirrors the Do Not Call Registry available for consumers to avoid telemarketers. The program is a follow up to the “Do Not Track” option implemented in most browsers. This option allows consumers to opt out of tracking by some third parties who have agreed to the initiative. This program would greatly help consumers manage their data, but has not gained much traction by itself since 2013.

 

“Consumer Bill of Rights”

In 2012 the White House first introduced the Consumer Privacy Bill of Rights, draft legislation that would give consumers more control over their data. The Bill was reintroduced in 2015. The Bill contains broad definitions for personal data and entities covered by the bill. The Bill requires covered entities to give notice to consumers about what data they use and how they use it, and requires covered entities to give consumers options to edit their data for accuracy. The Bill still has flaws, namely weak enforcement fines that are calculated by the number of days during which a violation occurs rather than number of violations. It is still a step forward and brings consumer choice issues to the forefront of legislation.

 

Data Broker Accountability and Transparency Act

In February of 2015 two democratic senators introduced the Data Broker Accountability and Transparency Act to the Senate. This bill would require data brokers to establish procedures to ensure accuracy of personal information and to provide cost free means for individuals to review their data. It would also require data brokers to provide individuals with reasonable means to exclude their information from being used by marketers. There are still many ambiguous definitions in the bill, and many sections aren’t clear in how those provisions should be enforced. The bill was sent to committee in 2014 and forgotten, and met a similar fate in 2015.

 

While there are many legislative initiatives to bring consumer choice back to consumers, many of these bills are gridlocked in a partisan Congress, and are unlikely to become law soon. Consumers must remain vigilant about how their data is used on the Internet.