Monthly Archives: January 2014
30
Jan 14
Steps you can take to protect yourself if your data was part of a date breach
29
Jan 14
CFPB Takes Action Against PHH Corporation for Mortgage Insurance Kickbacks
Today the Consumer Financial Protection Bureau (CFPB) initiated an administrative proceeding against PHH Corporation and its affiliates (PHH), alleging PHH harmed consumers through a mortgage insurance kickback scheme that started as early as 1995. The CFPB is seeking a civil fine, a permanent injunction to prevent future violations, and victim restitution.
The filing is against New Jersey-based PHH Corporation and its residential mortgage origination subsidiaries, PHH Mortgage Corporation and PHH Home Loans LLC, and PHH’s wholly-owned subsidiaries, Atrium Insurance Corporation and Atrium Reinsurance Corporation.
Mortgage insurance is typically required on loans when homeowners borrow more than 80 percent of the value of their home. It protects the lender against the risk of default. Generally, the lender, not the borrower, selects the mortgage insurer. The borrower pays the insurance premium every month in addition to the mortgage payment. While mortgage insurance can help borrowers get a loan when they cannot make a 20 percent down payment, it also adds to the cost of monthly payments for borrowers who have little equity in their homes.
Mortgage insurance can be harmful when illegal kickbacks inflate its cost. Increasing the burden on borrowers who already have little equity increases the risk that they will default on their mortgages. The Real Estate Settlements Procedures Act (RESPA) protects consumers by banning kickbacks that tend to unnecessarily increase the cost of mortgage settlement services. RESPA also helps promote a level playing field by ensuring companies compete for business on fair and transparent terms.
A CFPB investigation showed that when PHH originated mortgages, it referred consumers to mortgage insurers with which it partnered. In exchange for this referral, these insurers purchased “reinsurance” from PHH’s subsidiaries. Reinsurance is supposed to transfer risk to help mortgage insurers cover their own risk of unexpectedly high losses. According to today’s Notice of Charges, PHH took the reinsurance fees as kickbacks, in violation of RESPA. The CFPB alleges that because of PHH’s scheme, consumers ended up paying more in mortgage insurance premiums.
Enforcement Action
Today’s Notice alleges that PHH used mortgage reinsurance arrangements to solicit and collect illegal kickback payments and unearned fees – through its affiliates Atrium Insurance Corporation and Atrium Reinsurance Corporation – in exchange for the referral of private mortgage insurance business. The Bureau believes that from the start of the arrangements, and continuing into at least 2009, PHH manipulated its allocation of mortgage insurance business to maximize kickback reinsurance payments for itself. PHH Corporation and its affiliates are specifically accused of:
· Kickbacks: Over the approximately 15-year scheme, the CFPB alleges that PHH set up a system whereby it received as much as 40 percent of the premiums that consumers paid to mortgage insurers, collecting hundreds of millions of dollars in kickbacks;
· Overcharging Loans: In some cases, PHH charged more money for loans to consumers who did not buy mortgage insurance from one of its kickback partners. In general, they charged these consumers additional percentage points on their loans; and
· Creating Higher-Priced Insurance: PHH pressured mortgage insurers to “purchase” its reinsurance with the understanding or agreement that the insurers would then receive borrower referrals from PHH. PHH continued to steer business to its mortgage insurance partners even when it knew the prices its partners charged were higher than competitors’ prices.
A Notice of Charges initiates proceedings in an administrative forum and is similar to a complaint filed in federal court. This case will be tried by an Administrative Law Judge from the Bureau’s Office of Administrative Adjudication, an independent adjudicatory office within the Bureau. The Administrative Law Judge will hold hearings and make a recommended decision regarding the charges, which may be appealed to the Director of the CFPB for a final decision.
The Bureau’s administrative proceedings are similar to the administrative proceedings of other federal regulators, including the Securities and Exchange Commission, the Federal Trade Commission, and prudential regulators like the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation.
The Office of Inspector General at the Department of Housing and Urban Development (HUD) initiated the investigation of PHH’s reinsurance practices, and in July 2011, HUD’s authority over the investigation transferred to the CFPB. Since then, HUD has given the Bureau valuable assistance in this matter.
This administrative proceeding follows the Bureau’s settlements in 2013 with five mortgage insurers who participated in similar schemes.
27
Jan 14
CONSUMER FINANCIAL PROTECTION BUREAU ISSUES CONSUMER ADVISORY ON INDUSTRY’S DATA BREACH
Advisory Offers Tips to Protect Accounts in Wake of Recent Payment Card Data Breaches
WASHINGTON, D.C. — Today the Consumer Financial Protection Bureau (CFPB) published a consumer advisory to help consumers protect themselves in the wake of the recent breaches of payment card and other data. The advisory also contains information on where to get help if consumers suspect their information has been compromised.
“Consumer financial products often involve significant amounts of consumer data,” said CFPB Director Richard Cordray. “In light of recent data breaches, we want to be sure that consumers know how to protect themselves and where to turn if they do suspect fraud.”
The consumer advisory can be found at: http://files.consumerfinance.gov/f/201401_cfpb_consumer-advisory_card-security.pdf
Payment cards such as credit, debit, and prepaid cards are among the most commonly used consumer financial products. Over 70 percent of Americans have at least one credit card. Debit cards are now used for more consumer purchases than credit cards, and prepaid card use is continuing to grow. In recent months, data breaches have apparently exposed millions of payment card accounts to potential fraud. In addition, millions of consumers’ names, phone numbers, emails, and addresses also appear to have been stolen separately from card information.
Today’s consumer advisory includes steps consumers can take to protect themselves from data theft:
• Monitor accounts for unauthorized charges or debits: Consumers should regularly review their accounts online if possible, and at a minimum examine their monthly statements closely. Consumers should report even small problems immediately as some thieves may process a small charge or debit just to see if the account is live, or whether the consumer notices. Fraudulent charges may occur many months after information is stolen. Even if consumers think the PIN on their debit card was not stolen, they should consider changing the PIN in order to be on the safe side.
• Alert bank or card provider immediately if fraud is suspected: Consumers should alert their bank or card provider immediately if they suspect an unauthorized debit or charge. If fraudulent charges appear, the consumer should ask the card provider to close access to the account and issue a new card before more transactions come through. Under federal law and other applicable rules, consumers are generally not responsible for unauthorized debits or charges to credit or debit card accounts, as long as they report them quickly to their bank or card providers.
• Follow up with the bank or card provider and maintain records: If consumers find a fraudulent transaction, they should call the bank or card provider’s toll-free customer service number immediately, and also ask how they can follow up with a written communication. When consumers communicate in writing, they should be sure to keep a copy for their own records. Consumers should write down the dates on which they make follow-up calls and keep this information together in a file.
• Avoid scams that ask for personal information over email or by phone: A common scheme, known as “phishing,” involves a scammer contacting a consumer over email or phone and asking to verify account information. Banks and credit unions never ask for account information through email. If consumers receive this type of email, they should immediately contact their card provider and report it. If consumers receive this type of phone call, they can ask for a call-back number to verify the requestor is actually their financial institution.
If consumers are unsatisfied with how their bank or card provider responds to a report of fraudulent charges, they can submit a complaint to the CFPB. Card providers should investigate charges and respond quickly. Consumers have a right to see the results of the bank’s or card company’s investigations.
The CFPB accepts consumer complaints on payment cards and other financial products and services. Consumers can submit a complaint by:
• Going online at www.consumerfinance.gov/complaint
• Calling the toll-free phone number at (855) 411-CFPB (2372) or TTY/TDD phone number at (855) 729-CFPB (2372)
• Faxing the CFPB at (855) 237-2392
• Mailing a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244
27
Jan 14
JPMorgan Chase boss Jamie Dimon got a 74% pay hike for last year, even though the bank was forced to pay billions in fines and settlements last year.
In a government filing Friday, JPMorgan Chase (JPM, Fortune 500) said Dimon would receive $18.5 million worth of restricted stock that will vest over the next three years as his 2013 bonus. That’s up from a $10 million bonus for 2012. His $1.5 million base salary remains unchanged.
The bank said its board considered “several key factors.” Among them: JPMorgan’s “sustained long-term performance” and its efforts to put its legal problems behind it.
Dimon, CEO and chairman, had his total 2012 pay slashed by about half to $11.5 million after JPMorgan suffered estimated trading loss of nearly $6 billion during the year attributed to a London trader known as the London Whale.
During 2013 the bank agreed to pay $1 billion in fines to U.S. and UK regulators for lack of proper oversight of its traders related to that loss.
But that was only a fraction the fines and legal expenses the bank shelled out during the year for a variety of transgressions.
SNL Financial estimates that total payouts by the bank came to $18.6 billion for 2013 alone, as well as more than $1 billion in attorney costs during the year.
Provisions for those payments forced the bank to report a loss in the third quarter, the first of Dimon’s tenure as CEO. For the full year, the bank reported net income of $17.9 billion, down 16% from the previous year. But shares increased 33% during the year.
Dimon had been the top paid bank CEO in 2011 before the problems of the last two years.
The decision to raise his pay was first reported by the New York Times ahead of the filing.
24
Jan 14
Legal profession ranks fourth in suicide rate
This is disturbing on a personal note. The legal profession ranks fourth for its high rate of suicides, according to age-adjusted information provided to CNN by the Centers for Disease Control and Prevention. The top five are:
1) Dentists
2) Pharmacists
3) Physicians
4) Lawyers
5) Engineers
The CNN story also cites statistics that lawyers are 3.6 times more likely to suffer from depression than nonlawyers.
Several state bars are responding with hotlines, public education and lawyer assistance programs, the story says. Seven bar associations have added a mandatory mental-health component to their continuing legal education requirements. The states are California, Montana, Iowa, Mississippi, Florida, South Carolina and North Carolina. In addition, Kentucky has added a program on behaviors that increase suicide risk to its annual continuing education conference.
23
Jan 14
2013 Debt Collection Statistics
In 2013, 10,320 suits were filed under the FDCPA; 2,276 under the FCRA; and 1,862 under the TCPA.
FDCPA litigation has decreased for the second year in a row, down 10% over 2012 (which itself was down 7% over 2011). Also expected, TCPA litigation exploded this year, up 69% over 2012. The one surprise in the year-end numbers is that FCRA litigation eked out a small increase (just 1%, but still) over 2012, after spending most of the year down from 2012.
Meanwhile, CFPB complaints against debt collectors seem to have settled into a 1200′ish monthly rate, after exploding out of the gate over the summer.
22
Jan 14
Robocalls: your new rights
Robocalls are hard to stop. Despite the Do Not Call registry, the robocalls keep coming because they are cheap to set up and easy to disconnect once the spotlight hits.
And now robot callers can closely mimic human tones and responses. Many of us don’t like to rudely hang up on a real person, so we engage.
But there’s hope. The FCC issued new rules last fall designed to make sure you get only the calls you actually want. But they are getting a lot of pushback from industry. Tell them you want the right to stop the robocalls!
Tell the FCC to enforce your new robocall rights!
New rules from the FCC will put you in better control over who can call you, on both your landline and your wireless device.
Among your new rights:
• A telemarketer will have to get your written consent to receive a call or message. You can give your OK for them to call through paper or electronic means — web forms, a telephone keypress, or email.
• Robocalls to your home landline are no longer allowed based solely on an ‘established business relationship’ with you. Simply buying a product, or contacvting a business with a question, no longer gives them permission to call you.
• Telemarketers who call will now have to let you immediately opt out of receiving additional calls through an automated menu.
This post is taken from Consumer reports
18
Jan 14
Florida Lawfirm Phelan Hallinan Pays Up
Phelan Hallinan is a Florida law firm that represents banks in foreclosure, among other things. When Phelan Hallinan filed a foreclosure for the bank, it would include a notice that it claimed was required under the FDCPA- which is the Federal law that governs debt collectors. First off, the notice is not required and anyone who took a moment to consider the law would come to that conclusion. Second and more importantly, the notice itself misstated the law. Somehow, Phelan Hallinan managed to mess up something as simple as copying the wording of the law. In any event, I filed a lawsuit on behalf of my client in Federal Court in the Southern District of Florida, alleging that Phelan Hallinan violated the FDCPA.
Well, Phelan Hallinan paid up. My client was able to recover $1,000.00 in statutory damages (kind of like a fine) and Phelan Hallinan also paid my attorney’s fees and costs. If you were served foreclosure papers prepared by Phelan Hallinan, we may be able to help you as well. Give my office a call at 954-523-4357.
10
Jan 14
Do not Ignore a Credit Card Lawsuit-Avoid a Default Judgment
Avoid a Default Judgment
Fight a Collection Agency in Court
When sued for a debt, fight a collection agency in court to avoid a default judgment that can result in wage garnishment, bank account garnishment and credit damage. Any individual with unpaid debts may be at risk of a lawsuit by a collection agency.
How a Default Judgment Works
A default judgment simply means that a plaintiff in a lawsuit wins by default. This occurs most often when the defendant does not appear in court. A defendant who appears in court and loses the case has a judgment levied against him, but not a default judgment.
In most debt lawsuit cases, the collection agency will file a formal lawsuit with the court in the debtor’s county of residence. A summons is then delivered to the defendant. If the defendant does not reply to the summons within the given time frame, the judge accepts the word of the plaintiff as the truth and signs off on the judgment.
Even in cases where the debt in question is clearly outside of the state’s statute of limitations, unless the debtor replies to the summons or shows up in court to make this known to the judge, the out of statute debt will still result in a default judgment.
Reasons to Avoid a Default Judgment
A default judgment can severely injure a consumer’s financial future and should be avoided at all costs. Some of the consequences of a default judgment are:
•A judgment can cause a credit score to drop by 100 points or more, depending on how good the individual’s credit was before the ruling.
•A judgment is limited to a 7 year reporting period, but is renewable. This means it can linger on a credit report up to 20 years in some states.
•Wage garnishment is a common result of a judgment.
•A judgment may cause an individual to pay higher interest rates on loans and lines of credit for as long as it appears in the consumer’s credit file.
10
Jan 14
TCPA Class Action goes forward against Portfolio Recovery Associates in California
A federal judge in California Wednesday ruled that a debt buyer must face a consolidated TCPA lawsuit for the actions of one of its subsidiaries, specifically, using an autodialer to make debt collection calls to cell phones without the express consent of consumers. The order also noted that one of the company’s officers could be held liable.
U.S. District Judge John A. Houston in the Southern District of California ruled that while Portfolio Recovery Associates, Inc. (NASDAQ: PRAA) could not be held directly liable for calls made by Portfolio Recovery Associates LLC, the plaintiffs had shown enough evidence for vicarious liability under the Telephone Consumer Protection Act (TCPA) on the part of the parent company. The judge also ruled the same for the company’s chief operating officer, Neal Stern.
The case, Allen v. Portfolio Recovery Associates LLC, is comprised of five consolidated class action suits from various states and at least 20 “tagalong” filings. All cases allege that the company violated the TCPA by calling cellular telephone numbers with an automatic telephone dialing system (ATDS) without prior express consent.
PRA Inc. moved to dismiss the case against it and Stern arguing that it did not actually place the calls. Instead, a separate entity, PRA LLC, made the calls in question. But the plaintiffs noted in the consolidated action that “PRA LLC ‘accounts for the overwhelming majority (approximate 80%) of PRA Inc.’s revenue’ and that ‘[a]ccordingly, PRA, Inc. directly manages PRA LLC’s daily operations – and does not treat PRA LLC as a passive investment.’”
As for Stern’s involvement, the plaintiffs argued that “PRA Inc.’s compensation to Mr. Stern has been based, in part, on his development and implementation of strategies that increased the number of dollars recovered from consumers…” and that PRA LLC had acted as an agent of PRA Inc. and Stern.
Judge Houston agreed with the arguments as presented, writing, “This Court agrees with defendants that there are no allegations PRA Inc. or Stern made or placed any calls to plaintiffs and, thus, plaintiffs’ direct liability theory fails. However, this Court’s review of the record reflects that plaintiffs sufficiently plead facts in support of vicarious liability in the form of veil-piercing, agency and/or ratification theories. Construing the facts presented here as true and in the light most favorable to plaintiffs, this Court finds there are sufficient allegations contained in the FACC to state a plausible theory for vicarious liability against defendants PRA Inc. and Stern.”
Houston, thusly, denied PRA Inc.’s motion to dismiss.
PRA Inc. also sought to dismiss the plaintiffs’ request for attorneys’ fees under California law on the grounds that the TCPA does not expressly authorize them. The judge and defendants conceded that point, but Houston ultimately ruled that there is no compelling case law that shows successful cases not being awarded attorneys’ fees.
“Although plaintiffs do not dispute the TCPA does not expressly authorize fee-shifting or an award of attorneys’ fees, this court finds no reason to deny plaintiffs the opportunity, at this early stage of litigation, to seek such an award should plaintiffs prevail,” Houston wrote.