Consumer Financial Protection Bureau (CFPB)
CFPB Sues Horizon Card Services and CEO Robert Kane for Illegally Baiting, Gouging, and Trapping Families in High-Fee Credit Cards
The CFPB has sued Horizon Card Services and its CEO Robert Kane for tricking consumers into signing up for its expensive membership credit card. The CFPB alleges that Horizon and Kane lured customers into the membership program through deceptive marketing. Customers were charged illegal and excessive fees, and it was unreasonably difficult for customers to cancel their memberships and obtain refunds. The CFPB is asking the court to end Horizon and Kane’s illegal conduct and order them to pay a fine and redress to consumers.
Reliant Holdings is a nonbank corporation doing business as Horizon Card Services. Horizon offered consumers enrollment in a membership that came with periodic fees and that targeted financially vulnerable, subprime customers. Between 2017-2021, nearly 900,000 consumers in Horizon’s membership program collectively paid more than $51 million in fees; however, 93% of those members never used any Horizon products but paid over $45 million in fees.
Horizon marketed their line of credit as a regular credit card, but members could only use it to purchase goods from an online store that Horizon owned. This online store had limited selections that were overpriced and off-brand.
The CFPB alleges that Horizon and Kane violated the Consumer Financial Protection Act and Truth in Lending Act. Horizon misled and harmed consumers by:
CFPB Takes Action to Stop Banks from Harvesting Overdraft Fees Without Consumers' Consent
The CFPB has published guidance to help federal and state consumer protection enforcers stop financial institutions (FI) from charging overdraft fees based on phantom opt-in agreements. These phantom opt-ins occur when FIs claim they have customers’ consent to charge overdraft fees, but there is no proof that they really did obtain the customer’s consent. Per the Electronic Fund Transfer Act, banks/credit unions cannot charge overdraft fees on ATM and one-time debit card transactions unless the consumer has previously opted in.
When a consumer’s account falls below $0 due to a transaction, the FI can either decline the transaction or provide an overdraft loan; however, the FI cannot charge the member a fee for the overdraft loan if the consumer did not opt-in for this service. The CFPB has found that some FIs have been unable to provide evidence that the consumer opted in, yet they have been charging them fees for overdrafts.
This new publication is the latest step in the CFPB’s work to make sure financial institutions' overdraft services follow the law and that people are not charged junk or unlawful fees.
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Federal Trade Commission (FTC)
FTC Sends More Than $2.6 Million to Consumers Harmed by FloatMe’s Deceptive and Discriminatory Lending Practices
The FTC is currently refunding over $2.6 million to consumers harmed by the online cash advance provider FloatMe due to the company deceiving consumers with false promises of “free money” and participating in discriminating practices.
In January 2024, the FTC began to take action against FloatMe by alleging that the company used empty promises to entice consumers to join its service. The company then failed to deliver the promised advance amounts, charged unnecessary fees, made it difficult for consumers to cancel their membership, and discriminated against consumers who received public assistance.
The FTC plans to send PayPal payments on Sept. 23, 2024, to 449,344 FloatMe members who paid for instant cash advances. The eligible consumers are scheduled to receive an email from now to Sept. 20, 2024. Consumers have 30 days to redeem their payments.
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Small Business Administration (SBA)
SBA Extends PPP Loan Records Retention Requirement to 10 Years
The SBA released an interim final rule to extend the records retention requirement for the Paycheck Protection Program (PPP) loans to ten years. Currently lenders must comply with applicable SBA requirements for records retention, which for credit union lenders means compliance with the requirements of their federal financial institution regulator.
The SBA determined that there do not appear to be any consistent time requirements imposed by the federal financial institution regulators that are applicable to PPP records retention.
Effective Aug. 22, 2024, all PPP lenders must preserve for at least 10 years following final disposition of each individual PPP loan:
All applications for financing (including applications for withdrawn, approved, declined, and cancelled loans);
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