Atlanta, Georgia-based Fleet Finance, Inc. ("Fleet Finance") and its successor companies, Home Equity U.S.A. (incorporated in Rhode Island and Delaware), have agreed to settle Federal Trade Commission charges that Fleet Finance often failed to provide accurate, timely disclosures of the costs and terms of home equity loans to consumers. The FTC also charged that the company, on numerous occasions, failed to provide or accurately provide consumers with information about their right to cancel their credit transaction. Fleet Finance's actions, the FTC charged, were deceptive and violated the Truth in Lending Act (TILA) and its implementing Regulation Z, as well as Section 5 of the Federal Trade Commission Act ("FTC Act").
As part of the proposed settlement of the charges, Fleet Finance and Home Equity U.S.A. will pay $1.3 million, covering redress and administrative costs, to certain consumers whose mortgage loans were originated or purchased by Fleet Finance -- or a prior now-defunct corporation also called Fleet Finance, Inc., incorporated in Rhode Island ("Fleet Finance (RI)") -- between January 1, 1990 and December 31, 1993. Fleet Finance and its successor corporations also would be prohibited from future violations of the TILA and from various misrepresentations of credit costs and terms.
The TILA and Regulation Z require creditors to provide consumers with written disclosures of the costs and terms of consumer credit transactions and also establish various substantive protections for consumers, including the rights to rescind or cancel certain home equity mortgage transactions. Section 5 of the FTC Act prohibits, among other things, deceptive acts or practices in or affecting commerce.
"Fleet Finance's deceptive conduct deprived consumers of essential information regarding complex financial obligations secured by their homes," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "As a result, it was difficult, and in some instances impossible, for consumers to comparison shop with other lenders, to evaluate whether the loan cost and terms were reasonable, or to decide whether to cancel their home loans. This case, along with the agency's other recent home equity initiatives, underscores the Commission's campaign against deceptive mortgage lending practices affecting consumers' most valuable asset -- their home. Clearly, illegal practices will not be tolerated."
According to the FTC's complaint detailing the charges, Fleet Finance extended consumer credit transactions, or purchased consumer loan transactions through assignments in which Fleet Finance acquired or retained a security interest in the consumers' principal dwellings, and failed to provide the consumers with the right to rescind the credit transactions by: (a) failing to provide consumers with notices of the right to rescind; (b) waiving consumers' right to rescind, and disbursing funds, pursuant to oral and other insufficient waivers; and (c) failing to terminate the security interest and return any money and property given by the consumers when consumers exercised their right to rescind.
The complaint also alleges that Fleet Finance, in extending consumer credit transactions (a) failed to provide consumers with all TILA-required disclosures of the costs and terms of credit and/or to provide these disclosures prior to consummation of credit transactions; and (b) failed to provide, or to provide accurately, certain TILA disclosures, including but not limited to the annual percentage rate; the number, amount, and timing of payments scheduled to repay the obligation; and the total of payments. The complaint also alleges that Fleet Finance purchased consumer credit transactions that, on the face of the documents, failed to provide, or to provide accurately, the disclosures described in this paragraph. The complaint alleges that these deceptive practices violated the TILA and Regulation Z and Section 5 of the FTC Act.
Finally, the complaint alleges that Fleet Finance failed to retain TILA disclosures, TILA notices of the right to rescind, and/or other evidence of the terms and conditions of consumer credit transactions for the two years, as required by Regulation Z.
The proposed order settling these charges, announced today for a public comment period, contains a consumer redress program and injunctive provisions. The order requires Fleet Finance and Home Equity U.S.A. to pay $1.3 million for the redress program and administrative costs. Specifically, the redress program applies to certain consumers whose mortgage loans were originated or purchased by Fleet Finance (or Fleet Finance (RI)), between January 1, 1990 and December 31, 1993. It covers certain consumers whose mortgage loans, inter alia, were: (a) paid off to or written off by Fleet Finance, Fleet Finance (RI), or Fleet Financial Group, Inc. ("FFG"), a parent corporation, except by foreclosure ("eligible consumers" or "ECs"); or (b) were paid off by foreclosure by Fleet Finance, Fleet Finance (RI), or FFG ("eligible foreclosed consumers" or "EFCs"). The program also covers consumers who contact an 800-number set up under the proposed order and provide information showing they are, in essence, ECs or EFCs ("qualified consumers" or "QCs").
The redress plan will be administered by a redress agent hired by the FTC. The redress agent will mail claim forms to the many thousands of consumers (ECs and EFCs) whose names were provided by Fleet Finance. Letters accompanying the claim forms will explain that the recipients will receive a redress payment if they simply sign and date the form and return it to the redress agent promptly.
As noted above, consumers who do not receive claim forms from the redress agent but think they might fall within the definition of either an EC or an EFC will be able to call a special toll-free number staffed by the redress agent. The redress agent will tell consumers who call, and whose names are not already on the list, which documents should be provided to determine if they also fall within the redress group and can receive a redress payment. Consumers affected by the order may have had mortgage loans with "Fleet Finance" or with the following Fleet Finance entities: Fleet Financenter, Fleet Consumer Discount Company, Fleet Industrial Loan Company or Fleet City Agency.
The amount of the redress payment that consumers will receive will be determined after consumers have had a chance to return their claim forms and after consumers who did not receive a claim form but think they might qualify for a redress payment have been given a chance to submit their documents to the redress agent.
The redress agent's toll-free number will go into operation upon finalization of the order by the Commission. At present, the Commission has set up its own toll-free number, shown below, to assist consumers with information about the settlement.
FTC Tollfree Number for Fleet Finance Settlement: (800) 987-9330.
Consumers who call this number will hear a brief message about the settlement, including an explanation that the settlement is not yet final and that consumers who think they might qualify for a redress payment should call the same number in mid-September to learn how to contact the redress agent and provide any needed information. Upon finalization of the settlement, the message on the FTC's tollfree number will be changed to include the redress agent's new toll-free number. Consumers who call that new number will learn from the redress agent which documents, if any, are needed for the consumers to receive a redress payment.
The proposed order also would prohibit Fleet Finance and Home Equity U.S.A. from misrepresenting various costs and terms of credit, including: the annual percentage rate; the number, amount, and timing of payments scheduled to repay the obligation and the total of payments; the right to rescind the credit transaction; or any term or condition of financing for any consumer credit transaction. The proposed order also would require Fleet Finance and Home Equity U.S.A. to make all disclosures required by the TILA and Regulation Z for credit transactions. In connection with rescindable credit transactions under Regulation Z, the proposed order also would prohibit Fleet Finance and Home Equity U.S.A. from: (1) failing to deliver to consumers two copies of a proper Notice of Right to Rescind, as required by Regulation Z; and (2) modifying or waiving a consumer's right to rescind the transaction unless and until the consumer gives the applicable respondent a dated written statement that describes a bona fide personal financial emergency, specifically modifies or waives the right to rescind the credit transaction, and bears the signature of all consumers entitled to rescind the credit transactions, as required by Regulation Z. The proposed order also would prohibit Fleet Finance and Home Equity U.S.A. from failing to make all disclosures, and in the manner, required by the TILA and Regulation Z, and from failing in any other manner to meet the requirements of the TILA and Regulation Z.
Finally, the proposed order contains a number of recordkeeping and reporting requirements designed to assist the FTC with monitoring compliance with its terms.
The Commission vote to accept the proposed consent agreement for public comment was 4-0.
An announcement regarding the proposed consent agreement will be published in the Federal Register shortly. The agreement will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Copies of the complaint, proposed consent agreement, and an analysis of the agreement to assist in commenting, as well as a Consumer Alert, "Home Equity Loans: The Three-Day Cancellation Rule," are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; toll-free at 1-877-FTC-HELP (382-4357); TDD for the hearing impaired 1-866-653-4261. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC Matter No. 932 3074)