FTC’s Annual Report: Millions in Redress Sent to Consumers for Unwanted Junk Fees and Deceptive Lending Practices

Federal Trade Commission (FTC)

The staff of the Federal Trade Commission has provided its annual report to the Consumer Financial Protection Bureau on its enforcement and related activities in 2022 on the Truth in Lending Act (TILA), Consumer Leasing Act (CLA), and Electronic Fund Transfer Act (EFTA).

The report highlights the FTC’s enforcement actions related to the acts and their implementing regulations, including in the areas of automobile purchases and financing, payday lending, credit repair and debt relief, other credit, and electronic fund transfers:

  • Automobile Purchase and Financing: The report notes the FTC’s settlement with Illinois-based dealership group Napleton in April 2022, for violating the FTC Act by charging junk fees to consumers for unwanted add-ons such as payment insurance and paint protection costing consumers hundreds or thousands of dollars, and for violating TILA by advertising $90 down on mailers without disclosing or clearly and conspicuously disclosing the terms of repayment or APR. Among other things, the settlement led to $9.8 million in redress being sent to consumers in November 2022. The report also notes the Commission’s ongoing litigation against Traffic Jam Events, and refund payments sent to consumers in 2022 in the Bronx Honda and Tate’s Auto cases.
  • Payday Lending: The report highlights the $970,000 refund mailing as a result of the FTC’s case against Harvest Moon Financial for overcharging consumers millions of dollars, deceiving them about the terms of their loans and failing to make required loan disclosures, in violation of the FTC Act and TILA, and with making withdrawals from consumers’ checking accounts without authorization, in violation of the FTC Act and EFTA.
  • Credit Repair and Debt Relief: The report discusses the FTC’s $822,000 refund mailing as a result of its action against Student Advocates Team, a student loan debt relief scheme charged with falsely promising consumers it 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 the FTC Act and TILA.
  • Other Credit: The report notes the FTC’s case with 18 state partners against Harris Jewelry, charged with cheating military families with illegal financing and sales practices that violated the FTC Act, TILA, Military Lending Act (its first such case), EFTA, and numerous other federal and state requirements. The complaint charged the company with deceptively claiming that financing jewelry purchases through Harris would raise servicemembers’ credit scores, misrepresenting that its protection plans were not optional or were required, and adding the plans to purchases without consumers’ consent, in violation of the FTC Act; with failing to disclose or clearly and conspicuously disclose certain required written disclosures including the payment schedule; with advertising “$50 per payday,” without disclosing or clearly and conspicuously disclosing required credit terms including the downpayment, full terms of repayment and APR, in violation of TILA; and with using authorization forms with terms that were not clear and readily understandable for preauthorized electronic fund transfers from consumers’ accounts, in violation of EFTA. The case led to a settlement that requires the company to stop collection of millions of dollars in debt, provide approximately $10.9 million in refunds for purchased protection plans, provide refunds for overpayments, and assist with the deletion of any negative credit entries pertaining to debt in consumers’ credit reporting files. The settlement also requires the company to cease operations and dissolve pursuant to applicable state laws.

The report also highlights multiple rulemakings currently under way, including a proposed rule to ban junk fees and bait-and-switch advertising tactics that can plague consumers throughout the car-buying experience, as well as an advance notice of proposed rulemaking exploring a rule to crack down on junk fees proliferating throughout the economy. The report also notes the 2022 FTC staff report on dark patterns.

The report also highlights the agency’s Military Task Force, which comprises a cross-section of FTC representatives and focuses 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, and information about how debit and prepaid cards differ from other cards.

The FTC also provided a copy of the report to the Federal Reserve Board.

The lead attorney on this matter for the FTC was Carole Reynolds in the Bureau of Consumer Protection.

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