Top 5 Most Notable Marketing Compliance Enforcement Actions of 2022

Student loan servicer steered struggling borrowers into costly forbearances

Industry: Student Loan Servicing

Compliance Issue: Consumer Protection

Regulatory Agency: State Attorneys General

Total Penalty Amount: $1.85M

Summary: 39 State Attorneys General took action against one of the nation’s largest student loan servicers for widespread unfair and deceptive student loan servicing practices and abuses in originating predatory student loans. According to the settlement, the student loan servicing company steered struggling student loan borrowers into costly long-term forbearances instead of educating them about the benefits of more affordable, income-driven repayment plans.

Enforcement Action: The student loan servicing company agreed to cancel over $1.7 billion in debt, pay $95 million in restitution and pay $147.5 million in costs in a settlement with 39 attorneys general of allegations of widespread unfair and deceptive practices and abuses in originating predatory student loans.

Takeaway: Ensuring that consumers have access to all information they need to make an informed decision—and in a clear and conspicuous way—is critical to avoid consumer harm.

Bank failed to investigate and resolve consumer claims of unauthorized transactions

Industry: Banking

Compliance Issue: UDAAP

Regulatory Agency: The OCC, The CFPB

Total Penalty Amount: $225M

Summary: The OCC and the CFPB took separate actions against one of the nation’s largest banks for harmful practices relating to the bank’s administration of a prepaid card program to distribute unemployment insurance and other public benefit payments. 

The regulators found that the bank’s practices violated unfair, deceptive, or abusive acts and practices (UDAAP) in connection with the bank’s failure to investigate and resolve consumer claims of unauthorized transactions. The OCC also found other deficiencies in the bank’s administration of the program, including in operational processes, risk management, and internal controls.

Enforcement Action: The OCC’s order requires the bank to provide remediation to harmed consumers whose access to unemployment benefits was denied or delayed, including compensation for the financial harm suffered due to a loss of access to unemployment funds. The order also requires the bank to take comprehensive corrective action to improve its risk management and oversight over the program, its contract review and approval process, and enterprise-wide complaints risk management. 

The CFPB’s action requires the bank to provide redress to the consumers harmed and provide each affected consumer with a lump sum consequential harm payment. The bank also must pay a $100 million penalty, which will be deposited into the victims relief fund.

Takeaway: Organizations must have comprehensive oversight and visibility into all aspects of the business—including consumer complaints—to avoid compliance issues.

Lender failed to provide sufficient disclosures to consumers

Industry: Consumer Lending

Compliance Issue: Insufficient Disclosures

Regulatory Agency: Massachusetts Attorney General

Total Penalty Amount: $5.56M

Summary: The Massachusetts State Attorney General took action against a lender for failure to provide sufficient disclosures about the company’s debt collection practices. Consumers were not provided adequate information about the calculation methods for any deficiencies left on their auto loans after their cars were repossessed.

Enforcement Action: The lender is required to pay $5.56 million in penalties and consumer relief.

Takeaway: Having disclosures that clearly outline the terms of the specific product or service is a must to avoid harming consumers.

Credit services company falsely promised pre-approval for credit products

Industry: Credit Services

Compliance Issue: Dark Patterns

Regulatory Agency: Federal Trade Commission

Total Penalty Amount: $3M

Summary: The FTC took action against a credit services company for misleading consumers into believing that they’re pre-approved for credit cards using dark patterns. The company used false claims in its marketing with terms like “pre-approved” and “90% odds” to entice consumers to apply for products that they ultimately did not qualify for.

Consumers spent a significant amount of time applying for these misleading offers and took a hit on their credit scores since third-party financial companies made a “hard inquiry” on their credit reports.

Enforcement Action: On top of a $3 million consumer redress penalty, the company is required to stop deceiving consumers in their marketing materials, and to preserve records or any research or data that are used to market specific products to consumers.

Takeaway: Certain terms should be monitored closely (such as “pre-approved”) in marketing materials to ensure that they’re not misleading to the consumer and that any required disclosures are present.

Fintech used a faulty algorithm and made deceptive guarantees

Industry: Fintech

Compliance Issue: UDAAP 

Regulatory Agency: Consumer Financial Protection Bureau

Total Penalty Amount: $2.77M

Summary: The CFPB took action against a fintech company for a faulty algorithm and deceptive guarantees. The company marketed its automatic savings tool to guarantee no overdraft fees, but consumers ended up having to pay overdraft fees anyway. 

The company also promised to reimburse consumers for any overdrafts that were a result of using their product. But, the company often denied customers who submitted reimbursement claims. 

Lastly, the company also pocketed interest that should have gone to consumers after promising not to.

Enforcement Action: The CFPB ordered the fintech to cease all illegal activities, provide redress to consumers for overdraft fees, and pay a $2.7 million fine to be deposited into the Bureau’s victims relief fund.

Takeaway: The best way to avoid UDAAP violations is to ensure that your marketing accurately represents the product or service being offered. Don’t make any promises or claims that cannot be upheld.