UDAAP Cases and Enforcement Actions
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
Overdraft Protection
Woodforest Bank
OTS 10-018
OTS 18047
OCC 2010-202
AA-EC-10-93
OTS – 4/23/10
OCC – 10/1/10
Gutierrez v. Wells
Fargo
C 07-5923 WHA.
(N.D. Cal.)
Civil Lawsuit;
Class Action
Note: The case
has been in
litigation since
2008. Around
the time of the
decertification of
the class, there
was a settlement
however it is
now on appeal.
Filed – 4/17/08
Decert – 5/5/09
ODP
ODP
Overdraft fees deemed unfair and deceptive;
loans originated that had low probability of
repayment
• Lack of oversight of ODP programs;
• Fees generated were significant portion of
bank’s revenue;
Balance disclosures and overdraft fees.
Posting transactions from high to low.
• Certain debit card transactions are at first
reflected in an available balance, but then
later deleted from the available balance,
thereby misleading customers with inflated
account balance information and inducing
them to incur overdraft fees.
• The bank commingled debit card
transactions with check and ACH
transactions for posting purposes.
• The bank also adopted a practice it referred
to as the “shadow line,” which was an
informal line of credit to support debit card
transactions. The amount of the shadow
line was individually underwritten. The bank
Bank paid penalties of $400k and agreed to
reimburse affected customers $12m. Bank
ordered to redesign its ODP plans.1
The case eventually settled for $203m,
however, the court found that the bank’s
consumer account agreement did not
adequately disclose posting practices.
According to the court, the bank’s marketing
materials suggested that debit card
transactions would be posted in
chronological order. One of the bank’s
marketing themes was that debit card
purchase transactions would be
“immediately” or “automatically” deducted
from the account. Use of these terms, in
view of the court, lead consumers to believe
that the funds would be deducted from their
checking account in the order transacted,
1
Woodforest Bank was ordered to take remedial action with respect to ODP: set forth all aspects of each overdraft program to be offered by the Association, including without limitation the
standards under which a customer qualifies for the program; limitations on fees and the numbers of transactions on which fees may be charged; and disclosures, marketing, promotional materials,
contract provisions, terms, account management, monitoring, internal controls, and implementation associated with the overdraft programs; ensure that marketing materials do not mislead or make
implied representations that a deposit account product is suitable for consumers who have mishandled their credit or bank accounts in the past. The Bank was also prohibited from marketing deposit
accounts as being “free” or “low cost” while omitting costs, including ODP fees. The Bank was also required to disclose certain ODP features about ineligibility, suspension or reinstatement of
accounts. The Bank must also cease to assess additional daily OD fees (continuing overdraft fees) due to an account being continually overdrawn.
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
1
Case
Regulatory
Authority
Product /
Practice
Appeal –
11/29/10
Cross-Appeal
4/20/11
In the Matter of
Greenbank,
Greenville,
Tennessee
FDIC-10-802K
Mathena v. Webster
Bank
did not provide notice of this practice to its
customers.
Buffington v.
SunTrust Banks
1:09 CV 23632
and that the purchase would not be
approved if they lacked sufficient available
funds to cover the transaction.
The court noted that overdraft fees were the
second highest source of revenue for the
bank.
Consent Order –
Bank ordered to pay the US Treasury $132k.
ODP
• Violations of UDAP and Section 5 of FTC Act
• Marketing and implementation of overdraft
protection program.
Civil Lawsuit
(class action)
ODP
UDAP practices alleged in connection with
overdraft program. Bank manipulated debits
in a way that maximized overdraft fees.
 Debit transactions posted from highest
dollar amounts to lowest.
$3m settlement.
FDIC – 10/25/11
ODP
Overdraft program
• Practices were unfair and deceptive,
Violations of Section 5 of FTC Act.
Consent Order –
Bank ordered to reimburse affected
customers.
Civil Lawsuit
(class action)
ODP
Underlying action based on overdraft fees
which plaintiffs claim are not allowed per the
deposit agreement. Allegations include:
 Deceptive processing of transactions.
 Buffingtons charged more than $4k in
overdraft fees.
US Supreme Court denied to hear the case
and it will go into mandatory arbitration.
Note that a key point of the case is the
mandatory arbitration clause being
“unconscionable” due to its take it or leave
it nature. The Appeals Court sided with
SunTrust.
3/1/12
Hough v. Regions
Financial
Corporation, Regions
Disposition
FDIC – 8/4/11
Settled - 3/28/11
East Boston Savings
Bank
FDIC-11-558k
Issues
Civil Lawsuit
(class action)
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
ODP
Similar to the Buffington case, this involves
overdraft litigation and has the “mandatory
arbitration” component. Underlying action
Final outcome based on arbitration to be
determined.
US Supreme Court denied to hear the case
and it will go into mandatory arbitration.
Final outcome based on arbitration to be
2
Case
Regulatory
Authority
Bank
1:10 CV 20476
3/5/12
BankAtlantic
OCC – April 2012
Product /
Practice
ODP
Issues
Disposition
based on overdraft fees which plaintiffs claim
were contrary to the deposit agreement.
Allegation include:
 Breach of duty of good faith and fair
dealing.
 Unfair levying of overdraft charges.
 Deceptively processing transactions in
order to maximize overdraft fees.
 ODP fees were “usurious.”
determined.
BankAtlantic was cited by the OCC for
material violations of section 5 of the FTC Act
(unfair and deceptive practices) and OTS
advertising regulations in connection with its
ODP program. Deceptive actions included:
 Automatic enrollment of customers in the
AOP program without disclosing material
facts;
 Marketing checking and savings accounts as
“free” and having low cost features while
omitting material information; and
 Suspending customers’ enrollment in the
AOP program and reinstating enrollment in
the program after the accounts returned to
a positive balance, without disclosing the
suspension or the reinstatement status of
accounts to customers.
Resulted in downgraded CRA and
compliance ratings. Bank ordered to
establish limits on aggregate overdraft fees
as it related to consumers who frequently
overdraw their accounts.
Deposit Product Disclosures
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
3
Case
Regulatory
Authority
Product /
Practice
Bank of Wolcott
FDIC – 6/25/12
Disclosures; Reg. E
DBC Financial
FTC – 2/4/00
Reg. E; marketing;
ODP fees; other
fees
MarkleBank
FDIC – 9/9/11
Reg. E; disclosures
Issues
Disposition
Violations of section 5 of FTC Act (unfair and
deceptive practices) in connective with
deceptive practices that contradicted the
bank’s disclosed practices. Although the
disclosed practices were compliant with Reg.
E, the actual practices were found to be more
burdensome.
Deceptive bank card promotion to Social
Security recipients. Public benefits recipients
mislead regarding electronic transfers to bank
accounts.
 ATM card marketed as having “no up-front
fees” (however, there were account “set
up” fees and monthly service fees).
 Free overdraft protection of $1000 per year
marketed, however, there was an ODP fee
of $19.95 per month for any month
overdrafts incurred;
CMPs of $15k.
Error resolution violations constituted UDAAP
issues. Although Reg. E policy previously
reviewed by FDIC without problems, in a
subsequent exam UDAAP issues were found
to exist.
$82.5k fine.
$250k settlement
Bank procedures for the resolution of errors
involving the automated teller machines
and/or debit cards, and payment transactions
serviced through its automated clearing
house that were contrary to the Bank’s
disclosures concerning error resolution for
these products, in violation of Regulation E.
United Citizens Bank
FDIC – 2/19/13
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Reg. E; disclosures
EFT disclosures were deemed deceptive as
CMP $15k
4
Case
Regulatory
Authority
Product /
Practice
of Southern
Kentucky
Citizens Bank of
Philadelphia
FDIC-12-542b
FDIC-12-543k
RBS Citizens of
Rhode Island
4/24/13
4/29/13
OCC AA-EC-2013-12
Overdraft
Protection
Overdraft
Protection
Issues
bank actually administered more
burdensome practices. The administered
practices were contrary to Reg. E.
Section 5 of the FTC Act; UDAP related to
deceptive marketing and implementation of
ODP, checking rewards, and stop-payment
process for preauthorized recurring EFTs.
Section 5 of the FTC Act; UDAP related to
deceptive marketing and implementation of
ODP, checking rewards, and stop-payment
process for preauthorized recurring EFTs.
On an ad hoc basis, to Bank allowed
customers to opt out of Standard ODP, but
did not disclose technical limitations of the
opt-out that prevented it from being effective
for all transactions. Customers who opted
out of Standard ODP were charged overdraft
fees as a result of this practice.
The written customer agreement for Savings
Account Overdraft Protection did not disclose
that the Bank would not transfer funds from a
savings account to cover overdrafts in a
linked checking account if the savings account
did not have funds to cover the entire
overdrawn balance on a given day, even if the
available funds would have covered one or
more overdrawn items. Certain consumers
were charged overdraft fees as a result of
available savings funds not being transferred.
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Disposition
Restitution Plan to address harm to
customers;
CMP $5m
Independent auditor to oversee restitution
plan
Cease and Desist Order:
The Bank must establish a Compliance
Committee to oversee remediation of the
consent order.
The Bank must develop a Comprehensive
Action Plan to address issues in the Order.
Bank must update policies and procedures.
Bank must update compliance risk
management systems to ensure compliance
with UDAP, all applicable consumer
protection laws, rules and regulations,
including Section 5 of the FTC Act.
The Bank shall make full restitution and
remediation to consumers adversely
affected.
5
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
The Bank’s Personal Deposit Account
Agreement stated that the Bank would stop
preauthorized recurring EFTs at the
consumer's request, if notice was given at
least three business days before the
scheduled payment. Due to technical
limitations not disclosed to consumers, the
Bank was unable to process stop payments
between at least January 1, 2008 and August
1, 2010. As a result, some customers were
charged overdraft fees despite requesting
that certain EFTs cease.
The checking reward program disclosures
stated that its customers who have at least
ten eligible account transactions in a month
would receive rebates, without disclosing
posting date requirements for those
transactions. As a result, some consumers did
not receive anticipated rewards.
Credit Cards and Debit Cards
Capital One
CFPB – 7/16/12
OCC – 7/18/12
Credit Card addons; payment
protection; unfair
billing
Call center vendors engaged in deceptive
tactics to sell credit card add-on products
including payment protection and credit
monitoring. The products were geared
toward those with low credit scores and they
were solicited when they called in to activate
a new card.
• Products had a deceptive nature;
• Misled about eligibility;
• Misinformed about cost of products; and
• Enrolled customers without consent.
• Unfair billing practices (OCC only)
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
CFPB - Bank reached settlement of $140m to
be repaid to customers. May also have to
pay a $25m penalty.
OCC – Restitution of $150m (which includes
$140m CFPB). Separate restitution orders
will ensue for customers harmed by unfair
billing practices. $35m civil penalty.
Additionally, Capital One must implement an
enterprise risk management program to
detect and prevent unfair and deceptive
practices.
6
Case
Regulatory
Authority
Product /
Practice
Powers v. Santander
Consumer USA, Inc.
Civil Action –
4:12 CV 11932
10/17/12
Late fees; credit
card and debit
cards; auto loan
payments
Salazar v. Capital
One
7:2010cv00021
Civil Lawsuit
(class action)
1/5/10
Credit card addons; payment
protection
Monterey County
Bank
FDIC – 9/29/10
Debit card, credit
card program
features;
marketing
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Issues
Card holders will receive a refund of
associated finance charges, over limit fees
resulting from the products and those whose
payment protection plans were denied will be
paid for claims.
Santander is accused of assessing late fees to
consumers who had not actually fallen behind
on payments.
Details developing.
Unfair and deceptive practices regarding
payment protection plan and subprime credit
card marketing.
• Payment protection program would cover
payments in event of short-term disability
or unemployment.
• Product terms not adequately disclosed;
• Thousands paid for plan and received no
benefit;
• Bank signed up thousands who were
ineligible for the program due to being
retired.
• Bank increased its fee income through this
plan.
Violations of UDAP, Section 5 of the FTC Act
and the FDCPA
• Balance transfer and debit card program
deemed unfair, deceptive
• The Balance Transfer Card was marketed to
consumers with bad credit as an
opportunity to pay down old debts and
obtain credit cards.
• Lack of disclosure for consumers to make an
informed decision.
Bank failed to adequately disclose all fees
Disposition
To be determined.
Consent order – Bank will pay $2m in
restitution to affected customers. Bank will
also donate $300k to consumer financial
education and counseling.
7
Case
Regulatory
Authority
Product /
Practice
In the Matter of
World’s Foremost
Bank
FDIC – 3/8/11
Credit card overlimit-fees; late
fees; debt
collection
CompuCredit (an
affiliate of Columbus
Bank and Trust
Company)
FDIC – 6/10/08
FTC – 12/19/08
Credit card
lending; deceptive
marketing
Issues
and charges assessed in connection with
product, which was marketed by a third
party.
Deceptive practices and violations of Section
5 of the FTC Act
 A second over-limit fee (OL) was charged on
first day of billing cycle when cardholder
exceeded credit limits during prior billing
cycle.
 Cardholders contacted at places of
employment for debt collection.
 Practice of establishing minimum monthly
payment so low it causes OL fees.
 Practice of assessing late fees when
payments due on Sunday/holiday and
payment posted next business day.
CompuCredit offered subprime credit cards
through FDIC-supervised banks. Violations of
Section 5 of the FTC Act.
 Credit card solicitations did not properly
disclose credit limits and fees.
 Important information disclosed on
different pages, resulting in confusion.
 Cards marketed to those with low FICO
scores.
 Amount of available credit misrepresented
($300 advertised limit; however after fees
assessed, actual limit was $185).
Disposition
Consent order and order to pay – Overhaul
of bank’s compliance management system,
management and board review of all new
products, training, etc. Restitution and
CMPs of $250k.
$114m settlement and CMPs of $2.4m
Banks involved included First Bank of
Delaware, First Bank & Trust of Brookings, SD
and Columbus Bank & Trust Company
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
8
Case
Higher One, Inc.
Bancorp Bank
Regulatory
Authority
Product /
Practice
FDIC – 8/8/12
Debit card;
overdrafts and NSF
fees
Issues
Higher One is an affiliated entity of Bancorp
Bank. Both parties agreed to consent orders
and restitution to 60,000 students.
Student debit card program (OneAccount)
violated section 5 of FTC Act.
• Student account holders charged multiple
NSF fees from a single transaction.
• Accounts remained in overdrawn status for
long periods, allowing NSF fees to continue
accruing.
• Fees were collected from subsequent
deposits.
In the Matter of
Discover Bank
FDIC – 9/24/12
CFPB – 9/24/12
Deceptive credit
card add-ons
Joint enforcement by FDIC and CFPB where
Discover alleged to have engaged in
deceptive telemarketing and sales tactics
regarding credit card add-on products:
 Payment protection
 Credit score tracking
 ID theft protection
 Wallet protection
Disposition
Settlement:
$11m restitution to be paid to students.
CMPs - $110k Higher One; $172k Bancorp
Bank
Higher One must:
• Not charge NSF fees to accounts that have
been in a continuous negative balance for
more than 60 days.
• Not charge more than 3 NSF fees per day
on an account.
• Only one NSF fee may be charged per
transaction that is returned unpaid in any
21 day period.
• Marketing materials must be updated to
eliminate misleading representations.
Bancorp Bank must:
• Increase board oversight.
• Improve compliance management.
• Improve audit program.
• Increase oversight on third parties.
Discover must pay $200m consumer refund
plus addition $14m penalty.
Telemarketing scripts contained misleading
language likely to deceive consumers. Key
terms downplayed and reps spoke quickly
during the part of the call in which prices and
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
9
Case
Amex, American
Express Centurion
Bank
Regulatory
Authority
Product /
Practice
FDIC – 10/1/12
OCC
FRB
CFPB
Deceptive credit
card marketing and
debt collection
Issues
terms of the add-on products were disclosed.
It was determined that the Bank violated
federal law prohibiting unfair and deceptive
practices by, among other things:
Disposition
Settlement reached with regulators.
Consent orders, restitution, order to pay,
CMPs
 Misrepresenting to consumers that if they
entered into an agreement to settle old
debt (that was no longer being reported to
credit bureaus), such settlement would be
reported to credit bureaus, thereby
improving consumers’ credit scores.
 Using settlement solicitations that implied
that consumers who entered into
settlement agreements to partially pay such
debts would have the remaining balance of
their debts forgiven, when in fact the
balance remained a debt owed to Amex.
 Using solicitations that misrepresented
points and awards.
Advanta Bank
Corporation
FDIC - 2009
Cash Bank Rewards
for Credit Cards
American Express
Bank
OTS and FDIC 2009
Credit Card
Convenience
Checks
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Advanta's credit card "Cash Back Reward"
program advertised a percentage of cash
back on certain purchases by business credit
card accountholders.
 Tiered structure of the cash back payments
meant that not all purchases would qualify
for advertized cash back rate.
 It was nearly impossible to earn the stated
percentage of cash back reward payments.
FDIC issued a C&D. Bank must pay
restitution of $14m to affected customers,
and to pay a civil money penalty of $150k.
The OTS and FDIC brought enforcement
actions against American Express Bank for
failure to honor credit card convenience
checks without notice. Customers paid
returned check fees and experienced a
CMP of $250k
10
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
negative impact upon to their credit report.
Mortgage Products
Massachusetts v.
Fremont
897 N.E.2d 548, 551
(Mass. 2008)
Levin v. Citibank
2009 WL 3008378
(N.D. Cal. 2009)
Ellis v. J.P. Morgan
Chase & Co.
Massachusetts
Attorney
General;
Commonwealth
of
Massachusetts
6/9/09
Mortgage Lending;
Servicing,
Foreclosures
Civil Lawsuit –
8/30/10
HELOC Reduction
in Credit
Availability
Civil Lawsuit –
06/07/13
Mortgage Lending
Ohio Attorney
General – 2/9/12
Loan Servicing
US District Court for
the Northern District
of California
Case No. 12-cv03897-YGR
Subprime lending and foreclosure practices
• UDAP
• Lender should have reasonably foreseen
borrower inability to make scheduled
payments.
• Unfair for lender to make high-priced loan,
reap rewards of high fees and points, then
enjoy benefits of foreclosure.
Home equity line of credit reduction deemed
unfair and deceptive.
Although Reg Z provides that creditors may
reduce/suspend HELOCs when the value of
the borrower’s home is significantly less than
the appraisal value, the commentary to Reg. Z
states that what constitutes a “significant
decline” depends upon individual
circumstances.
Borrowers of mortgage loans had standing to
bring a claim of a violation of the California
Business and Professions Code for unfair
business practices where the borrowers paid
some or all of the alleged unlawful fees and
where the lender had omitted an itemization
of fees that would have identified the true
nature of each charged fee and instead
included a "miscellaneous fee" category of
fees never incurred by the borrowers.
Agreement with AG –
Bank must provide AG with 90 days advance
notice of any foreclosure action.
Foreclosure process substantively changed
in Massachusetts as a result of this action.
Court ruled partially in favor of Levin
and partially in favor of bank. However,
plaintiffs given permission to file new class
action suit.
Although Reg. Z permits a lender to reduce
HELOC if valuation of home declines, court
partially sided with Levin in that it
acknowledged he had paid down amount
owed (partial increase in equity) and that
appraisal used to value home was faulty.
No adjudication yet. Borrowers allowed to
bring a claim forward.
Loan Servicing
Ohio v. Mortgage
Servicers
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Inefficient handling of complaints, inquiries
and disputes
• UDAP
Lead to National Settlement with
Mortgage Servicers
11
Case
Regulatory
Authority
Product /
Practice
Fairbanks Capital
(now known as
Select Portfolio
Servicing)
FTC – 9/4/07
HUD – 9/4/07
Mortgage
Servicing; RESPA,
FDCPA, FCRA, force
placed insurance
Joint Federal-State
Mortgage Servicing
Settlement
DOJ, HUD, State
Attorneys
General –
February 2012
Unfair and
deceptive
mortgage servicing
practices
Issues
• RESPA
• Lenders criticized for not taking action to
prevent foreclosures.
• Inadequate handling of consumer
complaints and requests for information.
• Inadequate customer service
• Unreasonable or unwarranted fees
• Misrepresenting terms of loan
modifications
• Misrepresenting that a borrower qualifies
for a loan modification.
Subprime loan servicer charged with illegal
loan servicing practices.
• 5 year prohibition on marketing optional
products (e.g. home warranties).
• Refunds of optional product fees to
borrowers.
• Full disclosure of attorney or payoff fees
required in connection with foreclosures.
Reimbursement of fees charged that were
not actually performed.
• Monthly mortgage statements did not
include important information about loans.
• Payments applied to fees first, then P&I.
Action brought against five leading mortgage
servicers, large joint federal-state settlement
in history. Resulted in widespread reform in
the loan servicing industry.
 Robo-signing
 Dual-track processing (modification and
foreclosure at same time)
 Poor customer service
 Overall servicing misconduct
Disposition
2003 settlement with several subsequent
amended orders. Includes $40m settlement,
restitution to borrowers.
$25b settlement; $17b in assistance to be
provided to homeowners; $5.2b allocated
for homeowner assistance. Historic joint
federal-state settlement with the country’s
five largest mortgage servicers:
 Ally/GMAC
 Bank of America
 Citi
 JP Morgan Chase
 Wells Fargo
Reforms:
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
12
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
 Foreclosure affidavits must be based on
personal knowledge.
 Standing to foreclose must be documented
and disclosed to borrowers.
 Pre-foreclosure notice must be sent to
borrowers.
 Borrowers must be evaluated for loss
mitigation options before foreclosure
referral.
 Procedures required re default fees,
accuracy of account information, including
audits of accounts and monthly billing.
 Procedures required to ensure oversight of
foreclosure vendors.
 SCRA – enhanced protections.
Murphy v.
Ameriquest
Civil Lawsuit 2004
ARMs – Loan
Servicing
FTC –2005
Mortgages
O4 CV 12651 RWZ
FTC v. Capital City
Mortgage Corporate
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Ameriquest sued for engaging in deceptive
loan servicing practices and unfair financial
gain under Mass. UDAP statute, 93A. Bait
and switch tactics and improper disclosure of
ARM features.
 Confusing interest rate structure;
 High points and fees;
 Large number of “discount points” that
resulted in thousands of dollars added to
principal;
 Duplicative costs charged during refinances;
and
 Unjustified repayment penalties
FTC brought an enforcement action for
Capital City refusing to release lien after final
payment made on mortgage. This practices
was deemed to be a violation of the FTC Act,
section 5:
• Caused substantial economic injury when
A stipulation was reached in 2006. Note
that the stipulation was reached through
other Ameriquest borrowers joining forces
in a class action.
13
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
the liens were not released upon full
repayment;
• Practice not outweighed by benefits to
Capital City;
• Consumers could not reasonable avoid the
practice.
Llewellyn v. Allstate,
Nomura Credit and
Capital, NCC
Servicing, Ocwen,
et. al.
2013 – US Court
of Appeals for
the 10th Circuit
Loan Servicing
No. 11-1340
Russell v. BAC Home
Civil Lawsuit
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Mortgage Loan
The FTC stated that “consumer cannot chose
their loan servicer” which echoes recent
comments by the CFPB.
Servicing had been transferred to Ocwen
without proper notice to the borrower. Then
Ocwen transferred the servicing to NCC.
However, the borrower had been making
payments to Allstate, the original servicer but
they were not posted correctly and timely.
As a result, the loan became delinquent.
Behind the scenes, Allstate transferred the
funds to Ocwen, then Ocwen transferred the
funds back to Allstate because the loan had
subsequently been transferred to NCC.
Ocwen continued to negatively report the
loan which adversely impacted the
borrower’s credit. The borrower made
several complaints to Ocwen which were not
properly or adequately resolved. The
borrower faced hurdles that became
insurmountable in trying to resolve the
delinquency and credit reporting issue.
However, he ultimately filed a lawsuit for
alleged “outrageous conduct” by Ocwen for
loan servicing deceptions, unfair treatment
and erroneous credit reporting.
First Massachusetts case setting standards for
The district court found in favor of Ocwen.
The Appeals court “remanded” the case
(which is to the borrower’s favor). The case
will now be heard again in the district court.
Although the case was dismissed, it set
14
Regulatory
Authority
Product /
Practice
Loans Servicing
10-10670-MBB
2001 WL 99016
Mass.
2011
Republic Bank and
Trust
12/8/11
Case
Issues
Disposition
Servicing
banks’ violations of Consumer Protection Act.
Borrowers alleged that BAC violated Mass.
Gen. L. c. 93A, the Consumer Protection Act,
by failing to comply with federal regulations
relating to the Home Affordable Modification
Program (“HAMP”).
important standards and highlights banks’
requirements to abide by UDAAP statutes,
including the state UDAAP statute, MGL 93A.
Refund
Anticipation Loans
Unfair and deceptive practices were found
relative to Refund Anticipation Loans offered
by the Bank. Moreover, the Bank was found
to have engaged in unsound banking
practices and to have deficient oversight of
third party vendors providing electric refund
services on the Bank’s behalf.
Chase cited for UDAAP and FTC Act violations
related to “debt cancellation” and “debt
suspension agreements” related to auto
lending (collectively "credit protection
products"), which consisted of an agreement
by the Bank to suspend or cancel all or part of
the customer's obligation to repay an
outstanding account balance upon the
occurrence of a qualifying event, in exchange
for a monthly fee. The Bank's credit
protection products imposed various
eligibility requirements, provided various
exclusions, and set forth a process for
claiming benefits.
Credit Products
FDIC-10-079b
FDIC-10-216k
JPMorgan Chase
Bank, NA
6/14/11
AA-EC-11-57
Auto Loans - Chase
Payment
Assurance (“CPA”)
Cease and Desist – The Bank may no longer
make Refund Anticipation Loans
CMP of $900k (and the Bank may not seek
indemnification from any third party)
Consent Order:
CMPs - $2m
Restitution to customers
Customer service representatives (“CSRs”)
utilized high-pressure sales tactics and made
materially false, deceptive or misleading oral
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
15
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
statements relating to the cost and coverage
terms of the CPA product marketed and sold
to Chase Auto customers. Written scripts and
training materials with instructions to use
statements as "rebuttals" in response to
Chase Auto customers who declined or were
not initially inclined to purchase CPA. Certain
rebuttal statements were deceptive or
otherwise materially misleading because they
could lead a reasonable consumer to
misapprehend what was being offered and
affects a reasonable consumer's decision to
purchase CPA.
This practice was also subsequently found to
have existed in credit card lending, home loan
lending and other Chase products.
Other
American Debt
Settlement Solutions
CFPB –
May 2013
Fees related to
debt relief
The CFPB fined service provider $500k+ for
selling debt relief products and services that
mislead consumers. The fees charged are
deemed “illegal” by the CFPB.
$500k+ fines
The service provider charged consumers
illegal upfront fees for debt-relief services
that rarely, if ever, materialized
Achieve Financial
Services
FDIC – June 2013
FDIC-13-048b
FDIC-13-049k
© 2013 FIS and/or its subsidiaries. All Rights Reserved.
Practices related to unfairness and deception
regarding a prepaid mastercards. Specific
UDAAP allegations alleged regard advertising
and marketing, resolving claims of dispute,
and issues pertaining to delivery via ACH of
federal benefits payments. The use of the
word “free” particularly caught the FDIC’s
$110k
Lengthy consent order
16
Case
Regulatory
Authority
Product /
Practice
Issues
Disposition
attention and in addition to CMPs, the
consent order items mandated by the FDIC is
quite lengthy.
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17