The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Experian, one of the largest nationwide consumer reporting agencies, for failing to adequately investigate consumer disputes. According to the CFPB, Experian’s practices result in the inclusion of incorrect information on consumer credit reports, posing risks to consumers’ access to credit, employment, and housing.

“When consumers disputed errors on their credit reports, Experian conducted sham investigations rather than properly reviewing the disputes as required by federal law,” said CFPB Director Rohit Chopra. “Credit reporting errors can have serious consequences for a family’s finances, and it is critical that credit reporting giants follow the law.”

About Experian

Based in Costa Mesa, California, Experian is a subsidiary of Experian plc, a global data broker and analytics company headquartered in Ireland. As one of the nation’s three largest credit reporting conglomerates, Experian maintains data on most families in the United States. The company provides credit scores, credit reports, credit monitoring, and other related products to consumers and businesses. Experian collects information from data furnishers, such as banks, credit card companies, and debt collectors, and sells consumer reports to creditors and businesses to evaluate credit, employment, and housing opportunities.

Allegations Against Experian

The CFPB alleges that Experian has violated the Fair Credit Reporting Act (FCRA) by:

1. Conducting Sham Investigations: Experian uses flawed intake procedures that fail to convey all relevant information about consumer disputes to original furnishers. The agency allegedly accepts furnishers’ responses uncritically, even when they are illogical or unsupported. Consumers receive notices with investigation results that are often confusing, incorrect, or inconsistent.
2. Improperly Reinserting Inaccurate Information: Experian reportedly fails to implement tools to prevent the reinsertion of inaccurate information into consumer reports. This leads to consumers seeing previously disputed and corrected information reappear on their credit reports under the name of a new furnisher.
3. Violating Consumer Protection Laws: Beyond FCRA violations, the CFPB claims Experian’s faulty dispute procedures and uncritical deference to furnishers’ responses constitute unfair practices under the Consumer Financial Protection Act. 

The Importance of the FCRA

The FCRA mandates that consumer reporting agencies ensure the accuracy of consumer reports and conduct thorough investigations into disputed information. It also requires agencies to follow specific procedures before reinserting information previously removed due to disputes.

Impact on Consumers

Inaccurate credit reporting can significantly harm consumers by:

• Limiting access to loans, credit cards, and mortgages.
• Affecting employment opportunities where credit checks are required.
• Threatening access to rental housing or other critical services.

If you have experienced issues with credit reporting, it’s essential to know your rights and take proactive steps to dispute errors. Learn how to dispute inaccurate credit information.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take legal action against institutions that violate consumer financial protection laws. The CFPB’s lawsuit against Experian seeks to:

• Halt the company’s unlawful practices.
• Provide redress for harmed consumers.
• Impose civil monetary penalties, with funds directed to the CFPB’s victims relief fund.

FAQ

What are my rights under the FCRA? You have the right to dispute inaccurate information on your credit report and expect a proper investigation by the reporting agency.

How can I dispute errors on my credit report? You can file a dispute directly with the credit reporting agency. Learn more about the process here.

Source: Consumerfinance.gov

CFPB Finalizes Rule to Remove Medical Bills from Credit Reports

The Consumer Financial Protection Bureau (CFPB) has taken a monumental step by finalizing a rule to eliminate medical bills from credit reports. This action is expected to transform the financial landscape for millions of Americans by removing unfair barriers to credit access caused by medical debt.

What the Rule Does:

1. Removes Medical Debt from Credit Reports:
   • Medical bills will no longer appear on consumer credit reports, ensuring that past-due medical expenses do not impact credit scores.
   • This change will empower consumers to qualify for financial products like mortgages, car loans, and credit cards without the shadow of medical debt.
2. Ensures Fair Lending Practices:
   • Lenders can no longer use medical debt as a factor in determining creditworthiness.
   • The CFPB emphasizes that medical debt is often an unreliable indicator of financial responsibility, as it frequently arises from emergencies or billing errors.
3. Aligns with Consumer Protections:
   • This rule builds on previous actions by the CFPB, including efforts to address inaccuracies in credit reporting and ensure fair treatment of consumers.
   • Medical debt collections often stem from disputes over insurance coverage or billing errors, making their inclusion on credit reports particularly problematic.

Why This Matters:

Medical debt has been a significant hurdle for millions, disproportionately affecting those facing unexpected health crises or billing inaccuracies. The CFPB’s research has shown that the presence of medical debt on credit reports can unfairly penalize consumers, even when the debt is small or being disputed. By eliminating medical bills from credit reports, the CFPB aims to provide relief to consumers and promote fairer credit evaluations.

Implementation Details:

The rule, which amends Regulation V under the Fair Credit Reporting Act (FCRA), will take effect starting March 17, 2025. This timeline allows for a smooth transition while ensuring compliance across financial institutions. It also aligns with broader federal efforts to alleviate the burden of medical debt on American households.

A Broader Perspective:

This initiative is part of the CFPB’s ongoing commitment to protect consumers from financial harm and ensure equitable access to credit. By addressing the systemic issues associated with medical debt, the agency is helping millions of Americans achieve financial stability. Additionally, the CFPB’s efforts highlight the need for transparency and accuracy in credit reporting practices.

For more details, read the official CFPB announcement here.

CFPB Sues JPMorgan Chase, Bank of America, and Wells Fargo

On December 20, 2024, the Consumer Financial Protection Bureau (“CFPB”) announced that it has sued the operator of Zelle and three of the nation’s largest banks for failing to protect consumers from widespread fraud on America’s most widely available peer-to-peer payment network.

Early Warning Services, which operates Zelle, along with three of its owner banks—Bank of America, JPMorgan Chase, and Wells Fargo—rushed the network to market to compete against growing payment apps such as Venmo and CashApp, without implementing effective consumer safeguards.

Customers of the three banks named in the lawsuit have lost more than $870 million over the network’s seven-year existence due to these failures. The CFPB’s lawsuit describes how hundreds of thousands of consumers filed fraud complaints and were largely denied assistance, with some being told to contact the fraudsters directly to recover their money.

According to the CFPB, Bank of America, JPMorgan Chase, and Wells Fargo also allegedly failed to properly investigate complaints or provide consumers with legally required reimbursement for fraud and errors.

The CFPB is seeking to stop the alleged unlawful practices, secure redress and penalties, and obtain other relief.

For additional details, please CLICK HERE. 

Source: Consumerfinance.gov

CFPB Takes Action on Bait-and-Switch Credit Card Rewards Tactics

CFPB Finds Lenders Cramming Markup Fees and Confusing Terms into Solar Energy Loans

On August 7, 2024, the Consumer Financial Protection Bureau (“CFPB”) published an issue spotlight finding that some residential solar lenders are misleading homeowners about the terms and costs of their loans, misrepresenting the energy savings they will deliver, and cramming markup fees into borrowers’ loan balances. The report describes how fees often increase loan costs by 30% or more above the cash price, and that lenders often misrepresent the impact of the federal tax credit for solar installations. These loans are generally facilitated by lenders in partnership with solar installers and door-to-door sales companies.

Fifty-eight percent of solar projects were paid through loans in 2023, and the number of lenders is increasing accordingly. These lenders often partner with solar installers and employ a variety of marketing and door-to-door sales tactics to convince homeowners to enter into financing agreements.

The CFPB found that the rapid rise of nonbank lenders partnered with solar salespeople into the solar market is also raising the potential for illegal behavior and consumer harm. In contrast to auto loans or mortgages where consumers know they want a car or house and then seek out financing options, door-to-door salespeople are going directly to homeowners in attempts to convince them both to purchase a solar energy system and to do so via a loan through their company. Within this sales and lending scheme, many homeowners are discovering they are being duped and misled into contracts with inflated principals, ballooning monthly payments, and electricity savings lower than promised.

The CFPB has identified four areas of significant risks:

• Hidden markup fees: Lenders build hidden fees into their loans by marking up the principals of the loans. These “dealer fees” often increase the loan cost by 30% or more above the cash price of a solar project. Lenders frequently bake these fees into a loan’s principal without including them in the stated annual percentage rate (APR). Lenders also rarely and clearly separate these markups from the total cash price that consumers would otherwise pay for a system’s installation.
• Misleading claims about what consumers will pay: While receiving a tax credit is not guaranteed and based on a number of factors, many solar loan sales pitches promote the 30% federal “Investment Tax Credit” for residential solar installations. In fact, lenders will present loan principals as a “net cost” that assume the tax credit will be received. Consumers may end up believing either the tax credit will subtract from the “net cost” or that the “net cost” is what will be paid regardless of whether they end up qualifying for and receiving the tax credit.
• Ballooning monthly payments: Loan terms may require a substantial prepayment by a certain date that is equal to the expected tax credit. If a homeowner does not qualify for the tax credit, they will end up on the hook for the prepayment or face substantially higher monthly payments.
• Exaggerated savings claims: Homeowners report being told that solar panels will cover financing costs as well as eliminate future energy bills. While this promise may be true for some homeowners, the financial benefits of solar projects are uncertain and can vary significantly by geographic location and season.

In conjunction with the report, the CFPB released a consumer advisory warning homeowners of the risky practices in the solar lending market and sharing advice for borrowers who encounter illegal activity.

Source: Consumer Financial Protection Bureau

SEC Whistleblower Awards & The SEC’s Whistleblower Program

As of the end of fiscal year 2023, a total of almost $2 billion had been awarded to nearly 400 whistleblowers through the SEC’s whistleblower award program.

The Securities and Exchange Commission’s Whistleblower Program was created by Congress to provide monetary incentives for individuals to come forward and report possible violations of the federal securities laws to the SEC. The Office of the Whistleblower was established to administer the Whistleblower Program.

Whistleblowers may be eligible for an award when they voluntarily provide the SEC with original, timely, and credible information that leads to a successful enforcement action which results in an order of more than $1 million in sanctions.  Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1,000,000.

In FY 2023, the SEC awarded nearly $600 million—the highest annual total by dollar value in the Program’s history—to 68 individual whistleblowers. These totals include a single award for almost $279 million—the largest in the history of the SEC’s Whistleblower Program. The SEC has now awarded more than $1.9 billion to 397 individual whistleblowers since the beginning of the Program in 2011. 

Do Whistleblowers Really Make a Difference?

The plain and simple answer is: Yes!! A strong whistleblower program helps the SEC identify and halt securities fraud early and quickly to minimize investor losses.  Whistleblowers have provided tremendous value to the SEC’s enforcement efforts and significant help to investors, as well as furthered the SEC’s efforts to uncover and stop fraudulent investment schemes.

Who is an “Eligible” Whistleblower?

An “eligible” whistleblower is a person who voluntarily provides the SEC with original information about a possible violation of the federal securities laws that has occurred, is ongoing, or is about to occur. The information provided MUST lead to a successful SEC action resulting in an order of monetary sanctions exceeding $1 million.

One or more people are allowed to act as a whistleblower, but companies or organizations cannot qualify as whistleblowers. You are not required to be an employee of the company to submit information about that company.

What is “Voluntarily” Provided Information?

It is important to note that information is “voluntarily” provided, if it is furnished to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.

What is “Original” Information?

“Original information” is information derived from your independent knowledge (i.e., not facts derived from publicly-available sources) or independent analysis not already known to the SEC (i.e., evaluation of information that may be publicly-available, but which reveals information that is not generally known). Thus, if the SEC previously received your information from another person, that information will not be original information, unless you were the original source of the information that the other person submitted.

What Does “Leading” to a Successful SEC Action Mean?

Information is deemed to have “led to a successful action,” if your information causes the SEC to open a new investigation, reopen a previously closed investigation or pursue a new line of inquiry in connection with an ongoing investigation, and the SEC brings a successful enforcement action based, at least in part, on the information you provided. You may still be eligible for an award if your information relates to an ongoing examination or investigation, if the information you provide significantly contributes to the success of our resulting enforcement action. You may also be eligible if you report your information internally first to your company, and the company later reports your information to the SEC or reports the results of an internal investigation that was prompted by your information, as long as you also report directly to the SEC within 120 days.

Whistleblower Program Overview

Whistleblower awards can range from 10% to 30% of the money collected when the monetary sanctions exceed $1 million. Whistleblowers can report jointly under the program and share an award.

All payments are made out of an investor protection fund established by Congress that is financed entirely through monetary sanctions paid to the SEC by securities law violators.  No money has been taken or withheld from harmed investors to pay whistleblower awards.

By law, the SEC protects the confidentiality of whistleblowers and does not disclose information that might directly or indirectly reveal a whistleblower’s identity.

The more specific, credible, and timely a whistleblower tip, the more likely it is that the tip will be forwarded to SEC investigative staff for further follow-up or investigation. For example, if the tip identifies individuals involved in a scheme, provides examples of particular fraudulent transactions, or points to non-public evidence of the fraud, the tip is more likely to be assigned to SEC Enforcement staff for investigation.

Tips that make blanket assertions or general inferences based on market events, or which do not relate to the federal securities laws, are less likely to be forwarded to or investigated by SEC Enforcement staff. A whistleblower also should ensure that there is a nexus between a whistleblower tip that is provided to the SEC and, ultimately, what was charged in the enforcement matter.

In addition to establishing an awards program to encourage the submission of high-quality information, the Dodd-Frank Act and the SEC’s implementing regulations (Securities Whistleblower Incentives and Protections, 17 C.F.R.§ 240.21F-1 through 21F-17) prohibit retaliation by employers against employees who report possible wrongdoing based on a reasonable belief that a possible securities violation has occurred, is in progress, or is about to occur.

Protecting whistleblower confidentiality is an integral component of the SEC Whistleblower Program. The Dodd-Frank Act prohibits the SEC and its staff from disclosing any information that reasonably could be expected to reveal the identity of a whistleblower, subject to certain exceptions. Consequently, information that may tend to reveal a whistleblower’s identity is redacted from SEC orders granting or denying awards before they are issued publicly. This may include redacting the name of the enforcement action upon which the award is based.

Factors that may increase a monetary award percentage include the significance of the information provided by the whistleblower; the level of assistance provided by the whistleblower; the law enforcement interests at stake; and whether the whistleblower reported the violation internally through his or her firm’s internal reporting channels or mechanisms.

Factors that may decrease a monetary award percentage include whether the whistleblower was culpable or involved in the underlying misconduct; whether the whistleblower interfered with internal compliance systems or unreasonably delayed in reporting the violation to the SEC.

The time between the submission of a whistleblower tip and when an individual may receive an award payment can be several years, particularly where the underlying investigation is especially complex, where there are multiple, competing award claims, or where there are claims for related actions.

Characteristics of Successful Whistleblowers

The information, tips, and complaints provided by each award recipient was specific. For example, the whistleblower identified particular individuals involved in the misconduct, or provided specific documents that substantiated their allegations or explained where such documents could be located. In some instances, the whistleblower identified specific financial transactions that evidenced fraud, or provided detailed assessment of the wrongdoing.

The misconduct reported by award recipients was often relatively current or ongoing at the time it was reported to the SEC. Additionally, the vast majority of award recipients provided SEC staff with additional assistance and/or information (e.g., answered staff questions or provided testimony) after they submitted their initial tips.

An individual may be eligible to receive an award where her or his information leads to a successful enforcement action—meaning generally that the original information either caused an examination or investigation to open, or the original information significantly contributed to a successful enforcement action where the matter was already under examination or investigation.

The majority of the whistleblowers who have received awards under the program provided original information that caused SEC Enforcement staff to open an investigation, and a significant percentage received awards because their original information assisted with an already-existing investigation. In assessing whether information assisted with an already-existing enforcement action, the SEC will consider factors such as whether the information allowed the agency to bring the action in significantly less time or with fewer resources, and whether it supported additional successful charges, or successful claims against additional individuals or entities.

When the SEC has found claimants to be ineligible for awards on non-procedural grounds, it is often because the claimants’ information did not open an investigation or exam, open a new line of inquiry in an existing investigation, or significantly contribute to an existing investigation.

There is no requirement under the Whistleblower Rules that an individual be an employee or company insider to be eligible for an award.

Whistleblowers may obtain information of possible wrongdoing by a subject company or individual that is not their employer. Although the majority were employees or former employees of the company involved in the wrongdoing, the remaining award recipients obtained their information because they were either investors who had been victims of the fraud, professionals working in the same or a related industry, or other types of outsiders, such as individuals who had a personal relationship with the wrongdoer.

Whistleblowers seeking an award are not required to be represented by counsel, unless they choose to file their tips with the SEC anonymously. About 46% of the award recipients did not have counsel when they initially submitted their tips to the agency. The other 54% were represented by counsel, 19% of which filed anonymously. Some of the individuals who were not represented by counsel at the time they submitted their tips subsequently retained counsel during the course of the investigation or during the whistleblower award application process (although retaining counsel is not required to file for a whistleblower award).

Whistleblowers have assisted the SEC in bringing enforcement cases involving an array of securities violations A number of the award recipients reported information to the SEC concerning offering frauds, such as Ponzi or Ponzi-like schemes. Other award recipients provided tips to the SEC relating to false or misleading statements in a company’s offering memoranda or marketing materials, false pricing information, accounting, and internal controls violations, among other types of misconduct.

The Right to Report Information to the SEC and Be Protected from Retaliation

Section 21F(h)(1) of the Dodd-Frank Act expanded protections for whistleblowers and broadened prohibitions against retaliation. Following the passage of Dodd-Frank, the SEC implemented rules that enabled the SEC to take legal action against employers who have retaliated against whistleblowers. This generally means that employers may not discharge, demote, suspend, harass, or in any way discriminate against an employee in the terms and conditions of employment because the employee reported conduct that the employee reasonably believed violated the federal securities laws.

Dodd-Frank also created a private right of action that gives whistleblowers the right to file a retaliation complaint in federal court.

Exchange Act Rule 21F-17(a) prohibits any person from taking any action to prevent an individual from contacting the SEC directly to report a possible securities law violation. The Rule states that “[n]o person may take any action to impede an individual from communicating directly with the SEC staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement . . . with respect to such communications.”

Do You Qualify as An SEC Whistleblower?

If you voluntarily provide original, high-quality information (i.e., information derived from your independent knowledge, NOT facts derived from publicly-available information) about the possible violation of the federal securities laws that has occurred, is ongoing or is about to occur AND which leads to a successful SEC enforcement action, resulting in an order of monetary sanctions exceeding $1 million, then you MAY be eligible for an SEC whistleblower award of between 10% and 30% of the monetary sanctions collected in actions brought by the SEC and related actions brought by certain other regulatory and law enforcement authorities.

Remember, information is voluntarily provided if you provide information to the SEC or another regulatory or law enforcement authority before a) the SEC requests it from you or your lawyer or b) Congress, another regulatory or enforcement agency or self-regulatory organization asks you to provide the information in connection with an investigation or certain examinations or inspections.

Can You Submit Information Anonymously to the SEC?

Yes, however, if you wish to submit information to the SEC anonymously, you MUST be represented by an attorney in connection with the anonymous information submission to be eligible for an award.

What Kind of Wrongful Conduct Is of Interest to the SEC?

Examples of the kind of conduct about which the SEC is interested include:

• Ponzi scheme, Pyramid Scheme, or a High-Yield Investment Program
• Theft or misappropriation of funds or securities
• Manipulation of a security’s price or volume
• Insider trading
• Fraudulent or unregistered securities offering
• False or misleading statements about a company (including false or misleading SEC reports or financial statements)
• Abusive naked short selling
• Bribery of, or improper payments to, foreign officials
• Fraudulent conduct associated with municipal securities transactions or public pension plans
• Other fraudulent conduct involving securities

SEC Investigations and The Federal Securities Laws

The SEC conducts investigations into possible violations of the federal securities laws. Again, the more specific, credible, and timely a whistleblower tip, the more likely it is that the tip will be forwarded to SEC investigative staff for further follow-up or investigation. For example, if the tip identifies individuals involved in the scheme, provides examples of particular fraudulent transactions, or points to non-public materials evidencing the fraud, the tip is more likely to be assigned to SEC Enforcement staff for investigation.

It is important to keep in mind that the SEC does not have jurisdiction to take action on information that is outside the scope or coverage of the federal securities laws. The SEC may, in appropriate circumstances, refer your matter to another regulatory or law enforcement agency.

Attorney Involvement in SEC Whistleblower Matters

As one former Director of the SEC’s Division of Enforcement has stated:

One thing I get asked about a lot is how [the SEC] view[s] whistleblower counsel. It will come as no surprise . . . that we welcome the involvement of counsel in whistleblower tips. While whistleblowers can engage with [the SEC] without the assistance of counsel, counsel experienced in whistleblower representations can help with up-front triage of tips to identify those that have a nexus with the federal securities laws and that may have merit. And [attorneys] can work with whistleblowers going forward to identify information that will be important to us and that will allow us to advance [SEC] investigations.

The same SEC Enforcement official also highlighted that attorneys for whistleblowers can help manage client expectations regarding the length of SEC investigations and the awards process; help determine whether the whistleblower can furnish corroborating information to support a securities fraud tip; and, if necessary, segregate information and engage in discussions with SEC officials to prevent unnecessary disclosure of information protected by the attorney-client privilege or work product doctrine and, thereby, help minimize any negative impact on, or substantial delay of, an SEC investigation.  Additionally, whistleblowers and their attorneys can assist the SEC maintain the confidentiality of whistleblowers by identifying any facts or documents that they are furnishing that, potentially, could identify the whistleblower.

Do You Have Questions or Concerns About Providing Information to the SEC About Securities Fraud?

If so, please know that Kehoe Law Firm’s legal team understands the issues associated with making the difficult decision to voluntarily come forward with information about securities fraud or other wrongdoing.  Moreover, the Firm’s legal staff has extensive experience investigating and prosecuting fraud, as well as interacting with sources of information, especially brave, honest individuals who are willing to expose securities fraud. 

If you have questions or concerns about voluntarily providing information as a whistleblower to the SEC about violations of the federal securities laws, including questions about whistleblower award eligibility or the form and manner in which the information is required to be provided to the SEC, please contact Kehoe Law Firm, P.C., [email protected]. 

If you prefer to speak privately with an attorney, please contact either Michael Yarnoff, Esq., [email protected], (215) 792-6676, Ext. 804, or John Kehoe, Esq., [email protected], (215) 792-6676, Ext. 801.

Please see Frequently Asked Questions, Submit a Tip, Claim an Award, Final Orders, and Section 21F of the Securities Exchange Act of 1934 (Securities Whistleblower Incentives and Protection) for additional Whistleblower Program information.

Source: SEC.gov; SEC 2017 Annual Report to Congress: Whistleblower Program; SEC Office of the Whistleblower Annual Report to Congress for Fiscal Year 2023.