The Federal Trade Commission provided its annual report to the Consumer Financial Protection Bureau on its enforcement and related activities in 2021 regarding the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA) (collectively, the “Financial Acts”).
Under Dodd-Frank, the FTC retained its authority to enforce these regulations with respect to entities subject to its jurisdiction. The letter notes that, consistent with the Dodd-Frank Act, the FTC continues to coordinate certain enforcement, rulemaking and other activities with the CFPB pursuant to a memorandum of understanding with the Bureau.
With regard to enforcement actions related to the Financial Acts and their implementing regulations, the report highlights the following:
- Automobile Purchasing and Financing: The FTC continues its efforts to combat deceptive automobile dealer practices in two enforcement actions. First, in July 2021, the FTC announced a settlement with Richard Berry, the owner and manager of four auto dealers, in the FTC’s action against Tate’s Auto for misrepresenting and falsifying terms in advertisements. The settlement provides a $450,000 payment to the FTC for consumer redress, and prohibits Berry from misrepresenting the costs and other material facts related to vehicle financing and from violating the TILA and CLA. Second, in October 2021, the FTC issued an administrative opinion and order against Traffic Jam Events for sending consumers deceptive mailers about COVID-19 benefits and potential prize winnings, and for violating the TILA by quoting monthly payments for consumers to purchase vehicles that failed to provide or hid in fine print key financing terms required by law. The order specifically bans the defendants from the auto industry, prohibits misrepresentations regarding financial assistance from the government, and requires compliance with TILA.
- Payday Lending: The report highlights a 2021 settlement against the owners of a payday lending enterprise (Harvest Moon) for overcharging consumers millions of dollars, deceiving them about the terms of their loans and failing to make required loan disclosures. The owners and operators are banned from making loans and extending credit, nearly all debt held by the company will be deemed paid in full, and the companies involved are being liquidated, with the proceeds to be used to provide redress to consumers harmed by the company.
- Restitution and Disgorgement: The report notes the decision in AMG Capital Management, LLC v. FTCin which the U.S. Supreme Court ruled that Section 13(b) does not provide authority for the FTC to seek equitable monetary relief. In view of its loss of an important consumer protection tool with this decision, the FTC has asked Congress to amend the FTC Act to enable the FTC to obtain monetary relief. Moreover, Malini Mithal, Associate Director of the Federal Trade Commission’s Division of Financial Practices, recently stated on our podcast show, that the FTC is using several workaround enforcement strategies to avoid the holding in the AMG matter.
- Credit Repair and Debt Relief (Credit): The report discusses the FTC’s settlement with the operators of a student loan debt relief scheme (Student Advocates Team), charged with falsely promising the consumer that the company could lower or eliminate student loan balances, illegally imposing upfront fees for credit repair services, and signing consumers up for high-interest loans to pay the fees without making required loan disclosures in violation of TILA. The order bans the defendants from providing debt relief services and from collecting any further payments from consumers who purchased the services, and requires the defendants to return money to be used to refund consumers.
- Credit: The report highlights refund checks mailed by the FTC to people who lost money in a financing scheme that targeted customers shopping for computers and related electronic devices. The FTC brought successful litigation against BlueHippo Funding, LLC for violations of the TILA and engaging in deceptive practices in violation of the FTC Act, by promising to finance new computers, collecting money from consumers and failing to provide computers. The FTC is using the funds recovered to provide refunds to the consumers involved.
The FTC reported that its TILA and CLA research and policy efforts included the FTC’s Military Task Force, comprised of a cross-section of FTC representatives, and the Military Task Force’s continued focus on various initiatives to assist military consumers. The report further outlines the FTC’s consumer and business education efforts on truth in lending and electronic fund transfer issues, including updates about vehicle purchases and financing and add-on products and services that can cost consumers thousands of extra dollars, as well as information about how debit and prepaid cards differ from other cards, including important considerations about each type.
Regulation E (the EFTA): The report notes that in 2021, the FTC had two ongoing enforcement cases, with one involving violations of the EFTA and Regulation E in the context of “negative option” plans, whereby the FTC continued litigation against defendants engaged in illegal robocalls to deceptively market dissolvable oral film strips as effective smoking cessation, weight-loss, and sexual-performance aids, and enrolled consumers in auto-ship continuity plans without their consent. The other matter, described above, dealt with the settlement with a payday lending company (Harvest Moon).
With respect to EFTA research and policy work, the FTC issued an enforcement policy statement on negative options, warning companies against deploying illegal practices that trick or trap consumers into subscriptions. The FTC also continues to work with the Department of Defense interagency group and the American Bar Association’s Standing Committee on Legal Assistance for Military Personnel (ABA Lamp) on issues related to preauthorized electronic fund transfers in the military lending group, and provided input and trainings for judge advocates general and others in conjunction with the ABA LAMP trainings, on EFTs, FTC cases in this area, and the EFTA requirements.