October 2, 2018
2018 edition: 78 / 104
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$505 million back for payday loan customers - and two messages for business

For consumers who took out loans with online payday lender AMG, the company's illegal tactics left many of them saying OMG. But finally there's good news for AMG customers arriving in the form of $505 million in refund checks just mailed to people who borrowed money between January 2008 through January 2013. That's the largest amount ever sent in a refund program run by the FTC. At the same time, we have two messages for companies: a law enforcement warning to those who engage in similar shady tactics and a favor to ask of reputable members of the business community.

When consumers turned to AMG for online payday loans, they agreed to pay the company a one-time finance fee, but an emboldened AMG helped themselves to more - and more and more. Add up AMG's hidden fees and unauthorized withdrawals and people ended up paying far more for the loans that the agreed-upon amount. For example, a consumer who took out a $300 loan agreed to pay back $390. But by the time AMG finished fleecing the account, the consumer actually had to pay $975. And remember: These were folks already struggling to make ends meet.

The FTC sued AMG and Scott A. Tucker for a long list of law violations. In 2016 a United States District Judge ruled that the defendants had engaged in a host of illegal practices. Then in 2017, a federal jury in New York convicted Tucker and his attorney Timothy Muir for crimes related to the lending scheme. Tucker was sentenced to more than 16 years in prison.

Although portions of the cases remain on appeal, the FTC and the Department of Justice have already obtained $505 million in settlements as a result of those law enforcement actions and related ones. And the FTC is sending that money right back where it belongs: to the more than one million consumers who were injured by AMG's illegal actions.
Read more at The Federal Trade Commission

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Dennis Shaul, CEO of the Community Financial Services Association of America (CFSA), today released the below statement following the Federal Trade Commission (FTC) and Department of Justice's (DOJ) return of $505 million to consumers harmed by unscrupulous and unlawful lender Scott Tucker and AMG Services, Inc.:

"Today's actions by the FTC and DOJ mark an important step in addressing the issue of unscrupulous operators who are in many cases unlicensed, unregulated, offshore or otherwise illegally offering loans. Tucker and his companies do not represent the actions of legal, licensed lenders around the country who provide a vital credit to individuals and local communities.

"Unfortunately, the Consumer Financial Protection Bureau's small-dollar lending rule will shut down regulated businesses and allow other unscrupulous operators like Tucker to fill the demand for small-dollar credit, putting the very consumers it purports to want to protect at risk. Herein lies the biggest irony: the CFPB's rule does nothing to stop bad actors and gives a free pass to illegal actors operating in the shadows, who represent the greatest threat to consumers."
Read at Community Financial Services Association of America (CFSA)

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Payday loan victims bilked by former racecar driver to receive $505M

More than a million victims of an online payday lender called AMG Services will get refunds totaling $505 million, the Federal Trade Commission said Thursday, the largest litigated settlement in the consumer protection agency's history.

The man behind the scheme, former professional race car driver Scott Tucker, started operating out of a storefront in Kansas City in the 1990s. He routinely issued loans charging interest rates of 700 to 1,000 percent, far above legal limits for loans in states that regulate payday lending. It was relatively easy to add on surprise fees because customers were required to pre-authorize withdrawals from their accounts to take out the loans, the FTC said.

Tucker also entered into a number of agreements with Native American tribes in Kansas and Oklahoma, thinking tribal sovereignty would shield him from state laws, the government said.

Nearly 1.2 million refund checks will be mailed starting Thursday, the FTC said, six years after the agency first sued AMG and Tucker.

Consumers could be eligible for a refund if they took out loans between January 2008 and January 2013 from these seven companies, all AMG affiliates: 500FastCash, Advantage Cash Services, Ameriloan, OneClickCash, Star Cash Processing, UnitedCashLoans or USFastCash.
Read more at CBS NEWS

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WASHINGTON, D.C. - The Bureau of Consumer Financial Protection (Bureau) today began meetings in Washington, D.C. with members of its revamped Consumer Advisory Board, Community Bank Advisory Council, and Credit Union Advisory Council. This is the first joint gathering of these three panels of experts, who advise Bureau leadership on a broad range of consumer financial issues and emerging market trends.

"This marks the first meeting of the experts from outside government that make up the Bureau's new-look advisory committees, who are providing a wide array of new perspectives to consumer protection," said Bureau Acting Director Mick Mulvaney. "We look forward to hearing high-quality feedback from these experts in consumer finance markets to inform the Bureau's decision-making going forward."

The Consumer Advisory Board is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act to advise and consult with the Bureau's Director on a variety of consumer financial issues. The Bureau also created a Community Bank Advisory Council and a Credit Union Advisory Council. The Community Bank Advisory Council and Credit Union Advisory Council advise and consult with the Bureau on consumer financial issues related to community banks and credit unions. In March 2018, the Bureau issued a notice in the Federal Register outlining the responsibilities of the advisory committees, as well as the duties of their members, and solicited applications for appointment. Read more at Bureau of Consumer Financial Protection

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FCC Hangs Blockbuster $37.5 Million Fine Over Robocaller Accused of Spoofing Real Numbers

The FCC has announced its proposal to impose a fine of $37.5 million on a company accused of making robocalls and hiding the calls' origin behind the real phone numbers of consumers. The agency is attempting to show that it's cracking down on the out of control robocall industry, but critics say it's too little, too late.

On Wednesday, the FCC said that it was alerted by a whistleblower about the robocall practices of an Arizona-based company called Affordable Enterprises. According to the announcement, the company "made more than 2.3 million maliciously-spoofed telemarketing calls to Arizonans during a 14-month span starting in 2016 to sell home improvement and remodeling services."

Spoofing is the term for using various techniques to display a different phone number on a robocall target's caller-ID than the number that's actually being used by the caller. What makes the Affordable Enterprises case different is that it's accused of intentionally using phone numbers that belong to consumers. This makes it hard to file a complaint against the company and leads to confused Americans fielding angry phone calls out of the blue. The press release cites one innocent woman in Arizona who averaged more than five calls on her cellphone each day from people demanding that she stop calling them. "This is the Commission's first major enforcement action against a company that apparently commandeered consumers' phone numbers," the FCC said.
Read more at GIZMODO

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First-party fraud: What it is and how to guard against it. by Philip Burgess

From finding an unusual statistic to buying a one-of-a-kind heirloom or antique, virtually everything is easier to come by in today's instant information era.

But unfortunately, the age of convenience is not without its unfortunate side effects, as fraud has proliferated. In 2016, for instance, 15.4 million Americans were affected by it, based on estimates from Javelin Strategy & Research. The frequency of fraud hasn't subsided despite increased awareness among business owners and consumers, as 50 identity thefts occur every 60 seconds, according to the Identity Theft Resource Center.

There's a particularly pernicious threat that is sapping a tremendous amount of business owners' collective time, money and energy. It's called first-party fraud, and over the past 20 years or so has intensified in scale and scope. But what is first-party fraud? And how can you guard against it? The following is a brief overview of the scheme, how it manifests itself and what you can do to diminish your risk of being victimized.

What is first-party fraud?
First-party fraud is a premeditated scheme whose targets are primarily business owners, rather than customers, as is typically the case for third-party fraud. Otherwise known as "intent not to pay fraud," first-party fraud starts out in ways, not unlike most other transactions, where a customer seeks to buy products or services by way of credit. Typically during the approval stage, everything appears to check out, suggesting applicants are creditworthy because they make payments on time and don't have major outstanding debts. What isn't known to the lender is the applicant has no intention of following through on the amount he or she is borrowing. In other words, they're relying on their trustworthy track record - authentic or synthetic - to fool lenders into believing that they're a safe bet, when in reality they're the antithesis of trustworthy. Read more at MICROBILT
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CALIFORNIA regulator probes links between high-cost lenders and consumer finance sites

The state's top financial regulator launched an investigation Wednesday of high-cost consumer lenders after the failure of several bills in the Legislature that would have tightened oversight of the industry.

The Department of Business Oversight sent letters to 20 high-interest lenders, asking about their use of so-called lead generators - companies that operate websites connecting consumers to their firms.

The department's questions include how many customers come through lead generators, how loans to those customers are underwritten and how many of those customers wanted to borrow less than $2,500. Under state law, lenders can charge dramatically higher rates on loans of $2,500 or more than for smaller loans.

Department of Business Oversight Commissioner Jan Lynn Owen said she wants to make sure lenders and lead generators aren't pushing customers who want to borrow less money into larger, higher-interest loans. Her office has recently alleged that practice by several lenders.

"What we're seeking is additional information that will help us ensure lenders and lead generators do not use unfair, deceptive practices to trap consumers in high-cost loans they don't want and can't afford," said Owen, who announced the inquiry. Read more at LOS ANGELES TIMES

Dreher Tomkies LLP Dreher Tomkies LLP is a law firm concentrating in the areas of Banking and Financial Services law.

Digital Banking Users Are Turning to Chatbots

Though many digital banking users in the US still prefer to talk to a human for their financial needs, a recent study from Humley found that a good number are also turning to chatbots.

Indeed, more than four in 10 (43%) respondents said they prefer to address any issues they may have with their banking provider this way-more so than going in-person to a branch (35%) or finding the answer they need on a website (35%). And definitely more so than reaching out on social media (6%).

"It might seem surprising that consumers are comfortable with a chatbot for something as serious and personal as banking, but if you think about it, most consumers are already used to using essentially the same thing via phone to get basic info like account balances, recent transaction history, etc.," said eMarketer senior analyst Nicole Perrin.

"If they have a charge you don't recognize or a dispute to resolve, consumers are still going to want to speak to a human representative who can help them resolve it and who they will trust to get it right," she added. "But we're all very used to turning to robots to get basic facts about our accounts, so it makes sense to me that people would be interested in doing the same via digital channels. And it's the kind of thing chatbots are good at, as opposed to dealing with more complex types of information or problem-solving." Read more at EMARKETER

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Study: Credit Unions increasingly targeted by cyberattacks

A new report from digital security firm Akamai revealed that the financial services industry is one of the most vulnerable to botnet cyberattacks, and credit unions are increasingly targeted because of their smaller size.

The report focuses on "credential stuffing attacks." Akamai describes these attacks as botnets attempting to access a target site in order to assume an identity, gather information, or steal money or goods by using lists of usernames and passwords obtained through data breaches. Between November 2017 and June 2018, Akamai tracked more than 30 billion malicious login attempts.

One credit union is included as a case study in the report as an example of a "low and slow" attack, where botnets can remain active and undetected for long periods of times. Akamai warns that these attacks are "part of an expanding ecosystem of attackers coming to your site every day, increasingly using methods that you can't detect without specialized tools." Read more at NAFCU

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CALIFORNIA: 20 Lenders with High Triple-Digit APR Levels to Submit Information on Lead Generation Activity

Commissioner Says DBO (Department of Business Oversight) Considering Rulemaking to Regulate Lead Generators

SACRAMENTO - The Department of Business Oversight (DBO) today directed 20 consumer installment lenders with high levels of triple-digit APR loans to submit data and other information related to their online lead generation activities.

"We know from our enforcement work that California consumers who want loans with interest-rate limits are steered by online lead generators to lenders who only make high-cost loans that have no rate caps," said DBO Commissioner Jan Lynn Owen. "What we're seeking is additional information that will help us ensure lenders and lead generators do not use unfair, deceptive practices to trap consumers in high-cost loans they don't want and can't afford."

Owen also said the DBO is considering whether to promulgate regulations to provide more effective oversight of lead generators. "Lead generators, especially those who operate online, play a significant and growing role in borrower acquisition," she said. "In California, much of the activity is unlicensed and harmful to consumers. This problem needs to be fixed."

Additionally, Owen said the DBO is weighing whether to adopt rules that govern how licensees consider borrowers' ability to repay when making loans.

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