Consumer Bureau and NY Atty Gen’l Go After First Responder Scam

The list of hazards faced by first responders to the Sept 11th terror attacks is a long one. In addition to cancer, respiratory disease, and post-traumatic stress, the perils include financial scammers out to raid their medical compensation benefits.

In a federal lawsuit filed earlier this month, the Consumer Financial Protection Bureau (CFPB) and the New York Attorney General’s Office accuse a New Jersey company, RD Legal, of targeting firefighters, paramedics and police officers who rushed into the rubble of the World Trade Center.

“We allege that this company and its owner lined their pockets with funds intended to cover medical care and other critical expenses for people who are sick and sidelined,” Consumer Bureau  Director Richard Cordray said.

RD Legal’s modus operandi, according to the CFPB’s complaint, was to “swoop in” after victims had been awarded compensation but before they received it. The company would offer to “convert your settled cases into immediate cash,” and then charge illegally high interest on top of fees buried in the fine print of a long contract; some of its loans ended up costing the equivalent of 250% annual interest, the two agencies allege.

The Consumer Bureau was created after the 2008 financial crisis to do a simple job: get banks and lenders to treat people fairly. One way it does this is through enforcement actions which have so far delivered nearly $12 billion in refunds and relief to some 17 million Americans cheated by financial companies large and small.

In the RD Legal case, the Bureau is seeking to end the scam, impose monetary penalties, and force the company to return what could be millions of dollars to affected consumers. One of the potential beneficiaries is Elmer Santiago, a NYC police officer who was living in his jeep when he agreed to borrow $355,000. Eighteen months later, RD Legal handed him a bill for $860,000.

The company also pitched its services to former football players entitled to compensation from the NFL for neurological diseases such as CTE, Parkinson’s and Alzheimer’s. Contracts labeled “assignments and sale agreements” did not disclose interest rates because, RD Legal claimed, “the transaction is not a loan.”

Some people may have been seduced by the company’s promises to “cut through the red tape” and speed up their compensation. In fact, RD Legal provided no such help, according to the lawsuit.

RD Legal is a hedge fund and a player in what is known as the litigation finance industry, using wealthy investors to bankroll cash advances for lawsuits and settlements.The owner and founder of RD Legal, Roni Dersovitz, was named in the action, along with two affiliate entities. Dersovitz was previously sued by the SEC for defrauding investors and exploiting Beirut bombing victims.

— Madison Moore and Jim Lardner

 

Five big arguments against a move to fire Cordray

They’re spinning hard.

​Lobbyists for big Wall Street banks and predatory lenders are pushing the Trump Administration to fire CFPB Director Richard Cordray, and they’re telling reporters it’s a done deal. They’re hoping their spin will make it so.

They don’t want the Trump team to think before they act. And that’s understandable, because firing Cordray would be a terrible idea, as well as an unlawful one. Here are five reasons why:

#1 The CFPB has done a world of good for consumers. Since it got up and running less than six years ago, this agency has been bringing basic rules of fair play to the financial marketplace. Through its enforcement actions and complaint system, the Consumer Bureau has delivered some $12 billion in financial relief to more than 29 million Americans cheated by financial companies large and small.

#2 Students, servicemembers, veterans, and seniors would raise hell. The CFPB has been steadfastly in the corner of our nation’s service members and veterans, working with the Defense Department to close loopholes and make sure that the 36 percent APR limit on consumer loans to servicemembers and their dependents actually works,  while taking enforcement actions against a succession of financial fraudsters who specialize in exploiting military families. The Bureau has also stood up for student loan borrowers with actions such as its recent lawsuit against Navient, charging the nation’s largest servicer of student loans with an array of deceptive practices. And it has been aggressive in combating the growing problem of financial exploitation of the elderly.

#3 The CFPB is hugely popular. By refusing to be cowed by the payday lenders, the big banks, and their Congressional buddies, Cordray and his agency have made quite a few powerful enemies. But they have also a vast number of devoted friends. Across party lines, voters have an overwhelmingly favorable view of the CFPB and its work. Trump voters are no different: by a margin of 55 to 28 percent, they oppose efforts to weaken or eliminate this agency.

# 4 The White House would have a vexingly hard time explaining a move to fire the CFPB’s Director. Many people voted for Donald Trump in part because of his countless promises to stand up to the power of Wall Street. Attempting to remove Director Cordray would be an obvious cave-in to the financial industry. It would not go unnoticed.

# 5 He would almost certainly not get away with it. The CFPB is by law an independent agency, and not part of the Administration. Director Cordray’s term runs through July 2018, and the law says he can be removed only “for inefficiency, neglect of duty, or malfeasance in office.” Despite their feverish efforts, hostile lawmakers have been unable to come up with any charge that would pass the laugh test, and  no president has ever yet succeeded in removing an appointee for cause.

Rep. Mulvaney is the Wrong Choice for OMB–Two Constituents Say Why

Rep. Mick Mulvaney, Donald Trump’s choice to oversee the federal budget, said he hears only complaints about the Consumer Financial Protection Bureau (CFPB). That could be because he is listening to the financial services lobby, not the ordinary Americans the agency has helped.

The South Carolina Republican, whom Trump has nominated to head the Office of Management and Budget, went on a tirade during his confirmation hearing this week, calling the CFPB “the very worst kind of government entity.”

That was a surprise to South Carolinians who actually like the idea that there’s an agency in Washington fighting to make financial companies follow the law and treat people fairly.

The CFPB recently sued Navient, the nation’s largest student loan servicer, alleging that the company handled borrowers so unfairly that they ended up paying far more than was necessary. Having an ally against a big company, it turns out, is comforting to some South Carolinians.

Amanda Green of Rock Hill, South Carolina, said Mulvaney’s comment proves he’s “disconnected” from what worries people like her, a client of Navient.

“I am currently repaying my student loans to Navient, and having learned of the CFPB’s action against them, am comforted in knowing this happened.”

Standrick Jamarr Rhodes of Lancaster, South Carolina, has struggled to repay student loans as an elementary school teacher. He’d never heard of the CFPB until they sued Navient.

“To learn that I may have been cheated in that process and that there is an agency looking out for me is a relief,” he said. “Our representatives are not only wrong with comments attacking the consumer agency, but are the prime reason why I often feel government doesn’t work for people. This agency clearly does.”

The CFPB works. Rep. Mulvaney is wrong. #DefendCFPB and reject the #SwampCabinet

Treasury Nominee Is a Foreclosure King, a System Rigger, and a Disaster Profiteer

Steven Mnuchin is an emblematic beneficiary of a rigged system, who has made an extraordinary amount of money by virtue of insider advantage and willingness  to use it to take advantage of vulnerable people.

Mnuchin’s early years were spent following a path paved by his father, from Yale to Goldman Sachs.

At Goldman Sachs, he helped build the market for risky mortgage products from the ruins of the S&L crisis of the 80’s.

  • He spent his years at Goldman earning how to “profit from the savings and loan crisis of the 1980s by buying the assets of capsized banks on the cheap,”[1] trading the very products that would cause the massive foreclosure crisis from which he would later profit.
  • He was “front and center for the advent of instruments like collateralized debt obligations (CDOs) and credit default swaps (CDSs).”[2], which he described as ‘an extremely positive development.’
  • Mnuchin left Goldman with $46mm to try as a hedge fund manager to capitalize on the new financial markets he’d spent his career building.

After leaving Goldman, he leveraged relationships with wealthy friends to float through some cushy jobs.

Mnuchin’s time at his own hedge fund – Dune Capital Management – had all the hallmarks of the boom years:

  • Becoming entangled with Bernie Madoff’s notoriousponzi scheme – and getting out with millions in allegedly ill-gotten profits shortly before its collapse.
  • Flirting with some of the most unsavory crisis-era financial products such as the macabre Life Settlement contracts, which made bets on the life insurance policies of the elderly.

Mnuchin’s hedge fund, and Mnuchin himself, became best-known as a Hollywood producer and financier.

Dune and Mnuchin were embroiled in scandal through their web of relationships with the bankrupt and currently-under-investigation entertainment company Relativity Media.

  • Dune invested millions in the Hollywood media firm Relativity Media, and Mnuchin served as co-chairmain of its board. During Mnuchin’s tenure, Relativity also borrowed heavily from Mnuchin’sOneWest Bank. Relativity ran into serious financial trouble, ultimately filing for Bankruptcy protection in 2015. Just months earlier,  Mnuchin abruptly resigned from the board, and shortly afterward OneWest swept millions from Relativity’s bank accounts. Relativity was accused by creditors, who lost millions, of essentially being a Ponzi scheme, and is currently the subject of an FBI Investigation.

When the financial crisis hit in 2008, Mnuchin was sought to capitalize on the unfolding disaster.

Armed with a cadre of billionaire friends and an intricate knowledge of exotic financial instruments, Mnuchin struck a deal that would quickly make him the Foreclosure King.

IndyMac, the large west-coast mortgage lender that specialized in the the most toxic kinds of loans, had failed and was taken over by the FDIC, which was desperately seeking a buyer to take on the hundreds of thousands of mortgage loans in its portfolio.Mnuchin swooped in and in 2009, his group purchased most of IndyMac’s $23.5 billion of assets and re-named it OneWest Bank in a deal that kept the FDIC on the hook for billions in losses.

As the foreclosure crisis deepened across the country, OneWest got to work trying to maximize the profit from IndyMac’s books, which included the thousands of residential mortgages. It dedicated most of its resources to- and derived most of its profit from – pushing IndyMac’s base of troubled homeowners into foreclosure,  exacerbating the foreclosure crisis in the process.

Although the loss-sharing deal crafted with the FDIC was meant to encourage loan modifications and payment plans that could keep homeowners in their homes, OneWest found it more profitable to foreclose on more than 50,000 homeowners, often aggressively and even illegally.

Mnuchin foreclosed on thousands, becoming known as the Foreclosure King

While foreclosing on tens of thousands of homeowners, OneWest earned a reputation for widespread malfeasance:

  • OneWest was at the center of the Robosigning scandal, which revealed how OneWest rushed homes through the foreclosure process by using fraudulent documents and doctored paperwork
  • The California department of Justice found evidence of widespread misconduct, including fraud, tax evasion, and violation of other state laws

Mnuchin’s foreclosure practices also targeted vulnerable communities:

  • The Elderly – OneWest preyed on the elderly through their Reverse Mortgage unit, which foreclosed on over 16,000 elderly homeowners in California alone, accounting for 40% of all CA reverse mortgage foreclosures.
  • Communities of Color Targeted communities of color, with ⅔ of their foreclosures occurring in these neighborhoods in addition to evidence of redlining throughout their districts.
  • Servicemembers Nearly a quarter of the $8.5 million federal authorities ordered OneWest to pay in compensation for thousands of cases of foreclosure misconduct went to Servicemembers, who has been illegally foreclosed on in violation of specific laws protecting them from abuse.
  • Hurricane Sandy VictimsOneWest blocked the release of millions in aid due to the victims of Hurricane Sandy, and was found to be one of the worst offenders in an investigation by New York State authorities

Foreclosure was the first choice not the last resort for OneWest bank:

Despite federal programs to incentivize loan modifications and keep struggling families in their homes, OneWest only completed modifications for 23,000 – they evicted more than twice as many people as they completed modifications for.

There is, however, one example of a loan Mnuchin was willing to modify in the face of  borrower financial distress: Donald Trump, who sued Dune in 2008 to modify a loan he’d received for Trump Tower in Chicago.

Mnuchin Cashed out of OneWest, and sets sights on loftier goals.

In 2015 – after paying themselves $1.5bn in dividends – Mnuchin and the investors sold OneWest to CIT Group for $3.4bn.Mnuchin personally made hundreds of millions on the deal. The sale faced strenuous opposition from community groups, and scores of OneWest foreclosure victims shared stories of the terrible impact of the  bank’s abuse and misconduct.

[1] https://www.bloomberg.com/politics/articles/2016-08-31/steven-mnuchin-businessweek

[2] https://www.bloomberg.com/news/articles/2012-03-22/from-indymac-to-onewest-steven-mnuchins-big-score

A big reminder of why we need stronger rules for debt collectors — and the CFPB to write and enforce them

A lawsuit filed by the CFPB earlier this month underscores the importance of its efforts to take on the abuses of the debt-collection industry, both by enforcing the law, and through a rulemaking process that is already underway.

The lawsuit – against two debt-collection magnates operating out of Buffalo, N.Y. – involves a nationwide operation that is said to have engaged in outrageous practices, causing massive harm to millions of people. In its filing, the Consumer Bureau describes the two men, Douglas MacKinnon and Mark Gray, as the “ringleaders” of a network of companies that “harassed, threatened, and deceived” consumers, making tens of millions of dollars a year in the process. Since 2009, the action charges, McKinnon, Gray and their companies have been buying up payday loans and other defaulted debt for pennies on the dollar, routinely adding $200 to each acquired debt (regardless of whether the law allows that), and using a variety of illegal practices to collect. Some consumers have reportedly been pressured to pay as much as six times more money than they really owed.

Employees of MacKinnon’s and Gray’s companies, the lawsuit charges, impersonated law-enforcement officials (sometimes using “call-spoofing” programs to create the impression that they were phoning from government offices) and threatened legal action they had neither the power nor the intent to actually take – arresting a consumer for “check fraud,” for example.

According to the suit, MacKinnon and Gray manage three Buffalo-based debt collection companies – Northern resolution Group, LLC (NRG), Enhanced Acquisitions, LLC (Enhanced), and Delray Capital, LLC (Delray), and have set up a network of at least 60 firms “to collect on the debt portfolios that NRG, Enhanced, and Delray purchased.” The defendants directed and encouraged these illegal acts, and profited significantly from them, the lawsuit holds, adding that “tens of millions of dollars annually” were “funneled back to MacKinnon, his relatives, and Gray through payments to various sham companies controlled by them.

The lawsuit charges MacKinnon and Gray with violating the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Acts, which prohibit unfair and deceptive acts or practices in the consumer financial marketplace. The Bureau is seeking to shut down their operation and secure compensation for victims as well as a civil penalty against the companies and its partners. “[T]his suit sends the message that debt collectors that employ abusive tactics will be held accountable,” New York Attorney General Schneiderman said in a joint announcement of the action.   — Veronica Meffe

 

Wall Street Sets Political Outlay Record

Wall Street will set still another record for political spending this election cycle.

So far in 2015 and 2016, banks and financial interests have put more than $1.4 billion into efforts to elect and influence holders of national political office, according to Wall Street Money in Washington, a new report released this week by Americans for Financial Reform based on data compiled by the Center for Responsive Politics.

That spending total works out to more than $2.3 million a day!

Financial sector companies, employees, and trade associations have reported making nearly $800 million in campaign contributions since the start of 2015, more than twice the spending level of any other specific business sector in the Center for Responsive Politics database.

Some of the financial industry’s biggest donors have been hedge funds, with James Simons’ Renaissance Technologies and Paul Singer’s Elliot Management leading the way at $37.5 million and $20.2 million respectively. Of the campaign contributions that can be clearly linked to one political party or the other, 61 percent have gone to Republicans and 39 percent to Democrats.

The financial industry’s expenditures – about $667 million through the second quarter of 2016 – place the sector in third place, behind a category of “Miscellaneous Business” companies and trade associations at $780 million and health-related companies at $775 million.

These figures do not count much of the so-called “dark money” contributed to nonprofits that engage in political advocacy or the money spent on lobbying-related research and support activities. Nor do they include spending by “Miscellaneous Business” entities like the U.S. Chamber of Commerce, a national business group that lobbies extensively on financial issues.

afrgraph

Wall Street political spending has increased sharply since 2009 and 2010, when industry forces were trying to blunt or defeat the reform legislation that came to be known as Dodd-Frank. The legislation was eventually enacted over industry objections in 2010, but that just marked the end of one chapter and the beginning of another.

Since Dodd-Frank’s passage, big banks and other financial interests have been working nonstop to block, delay, and weaken important elements of that law – as well as the agencies responsible for carrying it out. At the same time, they’ve also been working to stymy efforts in Congress to move forward on the next steps needed to make sure Wall Street serves Main Street, instead of continuing to put us all at risk.

Another new AFR report, Where They Stand on Financial Reform: Votes Cast in the 114th Congress, details many of the financial industry’s latest efforts to avoid needed reform. Wall Street has enjoyed some real success in this lower-visibility phase of the battle, using a “must pass” 2014 budget bill, for example, to repeal an important provision of Dodd-Frank and let big banks go back to using insured deposits and other taxpayer subsidies to gamble on the riskiest of financial derivatives.

Since 2010, Wall Street-backed deregulation proposals have continuously clogged the legislative pipeline. In the current Congress alone, lawmakers friendly to Wall Street have introduced 10 separate legislative proposals to limit the authority or political independence of the new Consumer Financial Protection Bureau.

Meanwhile, despite polls that show lopsided majorities of Republicans as well as Democrats and Independents favoring tougher Wall Street regulation, Congress has yet to vote on a single bill that would move things in that direction.

The $2.3 million a day Wall Street executives are spending on politics certainly rates as a lot of money. But measured against the many special privileges that the financial industry and its execs continue to enjoy, that expenditure amounts to a smart investment – for Wall Street.

Originally posted at inequality.org

The Fed Begins to Crack Down on Bank Ownership of Commodities

On Friday, the Federal Reserve finally responded to years of calls to re-examine the role of big banks in commodity markets. Numerous observers, ranging from Senate investigators to regulators, have found evidence that banks have manipulated these crucial markets.  Sherrod Brown, the Ranking Member of the Senate Banking Committee, has been a leader in the effort to control bank commodity activities, holding multiple hearings on the issue and urging the Federal Reserve to implement rules limiting bank commodities activities. Americans for Financial Reform has also called on the Fed to take strong action to establish firewalls between banking and commodity markets.

The Federal Reserve has now advanced a real proposal to limit commodities involvement by banks. The proposal substantially increases capital charges for commodities holdings by banks, meaning that banks will have a significant economic incentive to exit these markets. It also improves disclosures and bans banks from a number of specific commodity markets activities that permit control of commodity supplies, including directing the specific activities of storage and transportation facilities, and being involved in energy management and tolling. All of these activities have been linked to commodity market manipulation.

Along with the Federal Reserve’s recent report on the activities and investments of supervised banks, which recommended that Congress place additional limits on bank activities in commercial markets, this proposal indicates that the Fed is finally taking more seriously the need to restructure banks to better comply with the separation between banking and commerce that is laid out in the Bank Holding Company Act and a long tradition of American banking law. While these measures are still too limited to reverse the enormous expansion of universal banks that has taken place over the last few decades, they are a good step.

Why can’t we get a vote on the one thing the parties agree on?

tows_glass_steagall_petition_3

Some of the rousers of rabble with Take on Wall Street delivering petitions outside of Representative Jeb Hensarling’s office.

When the two parties adopted their platforms this summer, observers noted that the Democratic platform was possibly the most progressive platform in the recent history, while the Republican platform lurched even further to the right on a number of issues.

But on one topic (you’ll be surprised which), they actually agreed: Breaking up too big to fail banks. Both parties’ platforms include calls to re-instate the Glass Steagall firewall between boring banking (you know, lending money to people and businesses) and risky casino-style investment banking (think “credit default swaps”).

Election day is fast approaching and Congress’s approval rating has barely improved from a few years back when it lagged behind root canals.  So  you’d think agreement on a major policy — particularly one with broad and deep public support — might be occasion for swift enactment of a bi-partisan bill. Indeed, the 21st Century Glass-Steagall Act is championed by  both Elizabeth Warren and John McCain, popular leaders in their respective parties. Instead, with Congress set to adjourn this week until after election day, Congressional leaders have yet to take a single step to live up to the words of their platforms.

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What should be done to stop banks like Wells Fargo from scamming us?

Image via Peg Hunter (CC BY-NC 2.0) / Cropped from original

Wells Fargo’s CEO John Stumpf deserves every bit of the anger that the Senate Banking Committee directed at him for leading Wells Fargo while it created more than 2 million fake deposit and credit-card accounts, and then charged unknowing customers for them.

Stumpf has tried to lay the blame at the feet of workers. But this was not the behavior of a few out-of-control workers. The problem was systematic, and it followed from Wells Fargo’s use of high-stakes sales quotas for its employees. As the Los Angeles City Attorney’s office explained in its lawsuit, these quotas were often impossible to fulfill, and yet employees who fell short were often fired.

But Wells Fargo’s failure points to a broader problem. After all, this is hardly the first time Wells has faced scrutiny for illegal acts. As Senator Sherrod Brown (D-OH) pointed out, this is only one of 39 enforcement actions that Wells has faced in the last ten years.

Wells Fargo has racked up over $10 billion in fines for offenses from racial discrimination in mortgage lending, tomortgage fraud, to violations of the Americans with Disabilities Act.

So what should be done to stop banks from scamming us? Americans for Financial Reform has five specific proposals.

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Wells Fargo execs should not profit from the company’s misdeeds

Last week, we learned from an important joint enforcement action by the CFPB, OCC and Los Angeles City Attorney that Wells Fargo had opened accounts for 2 million customers without their consent. Bank employees had been pressured to do so by aggressive sales quotas that could not be met through actual sales. This week, we are appalled by the further news that the executive who oversaw the unit responsible for this fraud was not fired, and in fact is retiring with nearly $125 million in compensation.

Regulators have a tool in front of them to make it harder for bank executives to get away with giant pay packages in cases of lawbreaking and abuse. Section 956 of Dodd-Frank and Section 39 of the Federal Deposit Insurance Act give the watchdogs a mandate to stop banks from rewarding executives for practices designed to produce short-term gains with long-term risks. The regulatory agencies should exercise their existing authority to compel banks to use pay-clawback mechanisms, and they should make sure the final rule implementing Section 956 requires banks to take back pay from executives who oversee lawbreaking. In addition, the CFPB and OCC should refer their findings to the Department of Justice for a full investigation.

In the meantime, it is important that the penalties resulting from the illegal activity at Wells fall on the executives responsible for putting an abusive system in place and allowing it to continue. Wells Fargo and its CEO John Stumpf should claw back the $125 million going to the company’s head of consumer banking, Carrie Tolstedt, who supervised the employees directly engaged in these illegal acts. The company should also recover the bonuses received by Stumpf himself during the time period covered by the abuses. This money should be used to pay the penalties and refunds.cfp