FDIC Enters Into $20 Million Consent Order With Debt Settlement Entities

On March 28, 2018, the Federal Deposit Insurance Corporation (“FDIC”) annou​nced settlements with a bank and an affiliated lender (“Defendants”) relating to allegations of deceptive lending practices.  According to the FDIC, the Defendants provided, as “debt-settlement products,” loans to borrowers who were heavily indebted, which loans had settlement fees of up to 25% of the principal amount outstanding.  The FDIC alleged that the Defendants committed unfair and deceptive practices by failing to provide borrowers with the essential terms of the loans they were signing up for, failing to inform borrowers they would have to negotiate their debt themselves, and misrepresenting the speed of the settlement and the benefit to the borrowers’ credit scores.

The FDIC alleged that these actions violated the prohibition against unfair or deceptive acts or practices contained in the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 45(a)(1); the Truth in Lending Act (“TILA”), 15 U.S.C. § 1601 et seq., implemented by Regulation Z, 12 C.F.R. § 1026.17(c); and the Electronic Fund Transfer Act (“EFTA”), 15 U.S.C. § 1693, implemented by Regulation E, 12 C.F.R. § 1005.10(e)(1).  As part of the
consent orders entered into by the two defendants, they have agreed to pay restitution to all affected borrowers—$20 million has been placed in a segregated account for that purpose—as well as civil penalties in excess of $1 million.  The Defendants have also agreed to take affirmative steps to comply with these statutes.

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