Financial Crisis News Center

Agencies Issue Final Rules on Risk-Based Pricing Notices

This story appeared in Bank Digest.

The Federal Reserve Board and the Federal Trade Commission have jointly announced final rules that generally require a creditor to provide a consumer with a notice when, based on the consumer’s credit report, the creditor provides credit to the consumer on less favorable terms than it provides to other consumers. Consumers who receive this “risk-based pricing” notice will be able to obtain a free credit report to check the accuracy of the report. Risk-based pricing refers to the practice of setting or adjusting the price and other terms of credit provided to a particular consumer based on the consumer’s creditworthiness.

CCH Briefing Paper Examines House Legislation

The CCH Editorial Staff of banking and securities law analysts has authored a detailed overview titled, "House Passes Wall Street Reform Act." From the introduction:

On December 11, 2009, the U.S. House of Representatives passed legislation to restructure the financial services regulatory system, the Wall Street Reform and Consumer Protection Act of 2009 (HR 4173), by a vote of 223-202. As discussed below, the sweeping array of reforms includes the Financial Stability Improvement Act, which would create a systemic risk regulator, strengthen regulation of depository institutions and bank holding companies, improve the asset-backed securitization process, and provide for an enhanced dissolution authority. The legislation also would create a Consumer Financial Protection Agency, reform the over-the-counter derivatives market, subject hedge funds to stricter scrutiny, impose new corporate governance mandates, adopt heightened requirements for credit rating agencies and expand regulatory enforcement powers. Among other measures, the legislation features expansive consumer mortgage protections and creates a Federal Insurance Office.

Download the briefing paper

Federal and State Agencies Target Mortgage Relief Scams

This story appeared in Bank Digest.

FTC Chairman Jon Leibowitz, joined by Senate Majority Leader Harry Reid, D-Nev., Nevada Attorney General Catherine Cortez Masto, and Assistant Attorney General Tony West of the Civil Division of the Department of Justice, announced “Operation Stolen Hope” as part of a continuing federal-state crackdown on mortgage foreclosure rescue and loan modification scams. The operation involves 118 actions by 26 federal and state agencies. The FTC actions were announced in Nevada, where one in every 23 homes is facing foreclosure. “These operators targeted consumers who were on the brink of financial disaster, and instead of holding them back, they pushed them over,” Leibowitz said. “If you're worried about keeping your home, avoid any company that asks for a large fee in advance, guarantees that they'll stop a foreclosure or modify a loan, or tells you to stop paying your mortgage company and to pay them instead.”

FTC Dismisses Individual as “Making Home Affordable” Imposter

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Federal Trade Commission has voted to dismiss defendant Neil Sperry from FTC v. Cantkier, a law enforcement action against several defendants marketing homeowner relief programs. The FTC alleged the defendants misrepresented that they are affiliated with free federal government programs, such as Making Home Affordable, in marketing mortgage modification or foreclosure relief programs for a fee to consumers. After the FTC filed its complaint earlier this year, a federal court issued an order stopping the defendants from making deceptive claims pending trial. FTC staff later learned that Sperry had no part in the alleged deceptive practices, and that his identity was used by unnamed persons as part of the scheme. The FTC therefore recommended that Sperry be dismissed from the case.

Two Credit Repair Operations Agree to Settle FTC Charges

This story appeared in Bank Digest.

Two credit repair companies and their principals have agreed to settle Federal Trade Commission charges that they falsely claimed they could clean up consumers’ credit reports and collected up-front fees for their services in violation of federal law. In one case, the agency alleged that the defendants marketed their services via web sites and real estate investment seminars and falsely claimed that their special relationships with creditors, collection companies, public records providers and credit bureaus enabled them to remove derogatory information from consumers’ credit reports. In the other case, a husband-wife team allegedly falsely claimed, through the Internet and newspaper classified ads, that their expertise enabled them to achieve the same results, the agency said. The settlement orders bar the defendants from making false claims when marketing credit repair services or any other product or service and specifically prohibit them from misrepresenting material facts. They also impose judgments of about $10.75 million, but suspend payments due to the defendants' financial conditions.

News Release at http://ftc.gov/opa/2009/10/successcredit.shtm

FTC v. Strobel at http://ftc.gov/os/caselist/0823141/index.shtm

FTC v. Successful Credit Service Corporation at http://ftc.gov/os/caselist/0823233/index.shtm

FTC Sues Organizations for Alleged Foreclosure Rescue Fraud

This story appeared in Bank Digest.

The FTC has announced the filing of lawsuits against two different groups of companies and individuals that allegedly engaged in fraud while offering assistance to consumers who were seeking mortgage loan modifications. According to the agency, Nations Housing Modification Center and its principals violated the Federal Trade Commission Act and the Telemarketing Sales Rule by misrepresenting themselves as a federal government agency or affiliate and falsely claiming that they would obtain mortgage modifications that would make consumers' loan payments substantially more affordable in virtually every instance. The FTC charged that Infinity Group Services and its president violated the FTC Act by falsely representing that they would: obtain a loan modification in all, or virtually all, instances; give full refunds if they failed to do so; and obtain loan refinancing for an up-front fee of $995. The agency also described preliminary injunctions or amended charges in four earlier cases.

Federal, State Officials Discuss Housing Anti-Fraud Efforts

This story appeared in Bank Digest.

Treasury Secretary Timothy Geithner, Attorney General Eric Holder, Housing and Urban Development Secretary Shaun Donovan, Federal Trade Commission Chairman Jon Leibowitz, Financial Crimes Enforcement Network Director Jim Freis and attorneys general from 12 states met on Sept. 17, 2009, to discuss emerging trends and proactive strategies to combat fraud against consumers in the housing markets as well as best practices to bolster coordination across state and federal agencies. The federal agencies have committed to coordinating information and resources across agencies to maximize targeting and efficiency in fraud investigations. This includes alerting financial institutions to emerging schemes, stepping up enforcement actions and educating consumers to help those in financial trouble avoid becoming the victims of a loan modification or foreclosure rescue scam.

FTC Proposes Rule on Debt Relief Service Telemarketing

This story appeared in Bank Digest.

The Federal Trade Commission has proposed rules intended to combat deceptive and abusive telemarketing of debt relief services that purport to reduce consumers’ credit card and other unsecured debt. The proposed rules would:

Foreclosure Rescue and Loan Modification Scams Targeted

This story appeared in Bank Digest.

Federal Trade Commission Chairman Jon Leibowitz, joined by California Attorney General Jerry Brown, has announced “Operation Loan Lies,” a coordinated national law enforcement effort to crack down on mortgage modification scams. The operation involves 189 actions by 25 federal and state agencies against defendants who deceptively marketed foreclosure rescue and mortgage modification services. The FTC actions, which affect consumers throughout the nation, are being announced in southern California, where the scams originated.

Early Consideration of Credit CARD Act Provisions Encouraged

This story appeared in Bank Digest.

The Office of Thrift Supervision has issued CEO Ltr 312 encouraging institutions under its supervision to consider provisions of the recently enacted Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act) prior to their effective date of August 2010. The OTS memorandum to chief executive officers stated that, in addition to providing a number of other important protections for consumers, the Credit CARD Act will address changes in interest rates on open end consumer credit plans. The Act also expands the prohibition against certain practices determined by the OTS, Federal Reserve Board and National Credit Union Administration to be unfair under Section 5 of the Federal Trade Commission Act.