While Congress is debating the future of the proposed centralized federal enforcement agency for the financial services sector, one thing regarding enforcement has already been established: With or without the proposed Consumer Financial Protection Agency (CFPA), the Federal Trade Commission (FTC) is aggressively pursuing violations. The FTC’s new Director for the Bureau of Consumer Protection is David Vladeck, and in a little more than one month on the job, Vladeck’s actions have made some strong statements about consumer protection. In his first 45 days, there has been the creation of a task force to help repair consumer credit and prevent questionable lending practices, as well as multiple settlements and litigations filed, many in the financial services sector. This confirms his claim that the first priority at the agency will be dealing with the rise of consumer financial fraud as a result of the economic downturn.
On July 1, Director Vladeck used his first press conference as head of the Bureau of Consumer Protection to announce a nationwide, joint federal/state law enforcement initiative against scammers attempting to take advantage of consumers made vulnerable by the poor economy. Thus far, “Operation Short Change” includes 15 FTC cases, 44 law enforcement actions by the Department of Justice, and actions by at least 13 states and the District of Columbia. In its cases, the FTC alleged that defendants made false and unsubstantiated claims via the Internet, infomercials, telemarketing, robocalls or print advertisements to market get-rich-quick and other similar schemes. Several of these schemes targeted consumers with mortgage- and credit-related problems.
At the press conference, Director Vladeck noted that “thousands of people have been swindled out of millions of dollars by scammers who are exploiting the economic downturn.” The FTC also recently announced two major consumer protection enforcement actions: One involving a nationwide crackdown against scammers and the other resulting in a $3.7 million penalty.
In one of the actions, the FTC and Equifax subsidiary TALX Corporation, has agreed to settle charges that it violated federal law by failing to provide certain disclosures to users of their consumer reports and to entities that provide information for consumer reports. The proposed settlement requires TALX to pay the government a $350,000 civil penalty and bars future violations.
TALX sells income and employment history information about consumers to lenders, pre-employment screeners, and others for use in determining their eligibility for credit, employment or other purposes, which makes it a consumer reporting agency subject to the Fair Credit Reporting Act (FCRA), according to the FTC. The company allegedly violated the FCRA by not providing the “Notice to Users of Consumer Reports: Obligations of Users Under the FCRA,” which notifies users of consumer reports of their statutory obligations, including notifying individuals if the user takes adverse action against them based on their consumer report. The company also failed to provide the “Notice to Furnishers of Information: Obligations of Furnishers Under the FCRA,” which notifies furnishers—entities that furnish information for consumer reports—of their obligations to provide accurate information, correct and update inaccurate information, and reinvestigate consumer disputes.
Also in July, the FTC and California Attorney General Jerry Brown, 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, were announced in southern California, where the scams originated.
“These con artists see the high foreclosure rates as an opportunity to prey on people in distress,” FTC Chairman Jon Leibowitz stated in the release. “They promise to rescue homeowners in troubled financial waters, but after they take their money, they throw them an anchor instead of a lifeline. People facing foreclosure should avoid any company or individual that requires a fee in advance, guarantees to stop a foreclosure or modify a loan, or advises the homeowner to stop paying the mortgage company.”
The FTC announced four other lawsuits, bringing the number of mortgage foreclosure rescue and loan modification scam cases the Commission has brought to 14 since April. Twenty-three state attorneys general and other agencies are participating in the operation, taking action against 178 companies engaged in these types of deception.
To say Director Vladeck has hit the ground running is putting it lightly! The new director was named to the position after a handful of consumer watchdog groups called for FTC Chairman Leibowitz to appoint someone with “a track record as a genuine champion of consumer rights.” Prior to being named to the FTC post Vladeck was co-director of Georgetown Law Center's Institute for Public Representation, a program for civil liberties, open government and regulatory litigation. Prior to his time at Georgetown Law, he spent nearly 30 years with the Public Citizen Litigation Group, a national, non-profit consumer advocacy organization that represents consumer interests in Congress, the executive branch and the courts. Vladeck has argued a number of First Amendment and civil rights cases before the Supreme Court, and more than 60 cases before the Federal Courts of Appeal and State Courts of Last Resort.
Let these actions serve as notice to mortgage originators about being in compliance with Federal laws. If these early announcements are any indication, the FTC’s new Director of Consumer Protection Vladeck may be just what the consumer watchdogs were looking for.
Terry W. Clemans is the executive director of the National Credit Reporting Association Inc. (NCRA).