24 2017 HIGHLIGHTS We tracked four significant actions in the area of debt collection and settlement that each garnered over $10 million in consumer relief, restitution, civil money penalties, and other costs. Of the four, three involved state attorneys general, and two involved the FTC. FTC and Illinois AG Settle with “Phantom” Debt Collectors for $47 Million. In November, the FTC and Illinois Attorney General announced that they reached a settlement to resolve a joint enforcement action brought against affiliated Chicago based debt collectors that allegedly used false and misleading tactics in attempting to collect on payday or other small-dollar loans. The orders imposed a judgment against the companies and their principals of more than $47 million, which was to be partially suspended upon their surrender of $9 million in assets. The orders also banned the defendants from the industry. The action was part of “Operation Collection Protection,” a now- defunct joint federal-state enforcement effort targeted at deceptive and abusive collection practices. North Carolina Attorney General Secures Over $35 Million in Settlement with Debt Relief Providers. In March, the North Carolina Attorney General announced that it settled a lawsuit filed in the Wake County, North Carolina Superior Court against three debt relief companies (Orion Processing, Swift Rock Financial, and World Law South) and two individuals. The complaint, brought by the AG and the North Carolina State Bar in June 2014, alleged that companies ran an illegal debt relief scheme by charging advanced fees to over 1,400 consumers in exchange for promising to reduce consumers’ credit card debt through settlements with creditors or debt collectors. As a result of the litigation and settlement, the AG secured a total of $6.6 million in consumer relief, and $30 million in civil monetary penalties ($6 million dollars against each company and individual). Debt Collector Ordered to Pay $25 Million to State of Texas for Illegal Debt Collection Practices. In July, Texas Attorney General Ken Paxton secured a $25 million judgment and permanent injunction against Samara Portfolio Management, LLC and a small law office for violations of the Texas Debt Collection Act, the Texas Deceptive Trade Practices-Consumer Protection Act, and the Identity Theft Protection and Enforcement Act. A jury in the District Court of Harris County determined that the defendants violated the Texas Deceptive Trade Practices-Consumer Protection Act when they filed nearly 900 consumer debt collection cases against debtors who did not live in Harris County at the time of suit and who did not enter into the underlying loan contracts in that county. In its final judgment, the Texas state court ordered the defendants to pay the State of Texas $25.16 million in civil monetary penalties and over $559,000 in attorneys’ fees and investigative costs. FTC Secures $19.4 Million in Judgments Over Mortgage Relief Scheme. In January, the FTC announced that it agreed to two stipulated orders with individuals who participated in an alleged fraudulent mortgage relief scheme. According to the FTC, the individuals promised consumers “at least $75,000” or complete relief on their mortgages through a “mass joinder lawsuit.” The FTC alleged, however, that consumers never obtained such relief, nor were they ever likely to do so. Under the terms of the stipulated orders, both individuals consented to lifetime bans from the debt relief industry. In addition, the FTC secured an $18.3 million judgment as compensatory contempt relief against one individual, and a $1.1 million judgment as equitable monetary relief against the other. U.S. Department of Defense Issues Interpretive Rule on Military Lending Act. In December, the Defense Department amended its interpretive guidance on the Military Lending Act, which provides strict consumer protections to military servicemembers, including by limiting the maximum APR a lender may charge and requiring additional disclosures. Purchase money transactions are exempt from the Act, and the new rule clarified that hybrid transactions, where additional credit is extended beyond the purchase price, are exempt if the financing is related to the property being purchased. The new rule also clarified that while a lender may take a security interest in connection with a loan, the Act does not preempt any other state or federal laws to the contrary. 24