WASHINGTON (7/30/14)--The Consumer Financial Protection Bureau (CFPB) and attorneys general from 13 states have obtained approximately $92 million in debt relief on behalf of 17,000 consumers harmed by predatory lenders. Colfax Capital Corporation and Culver Capital, LLC, also collectively known as Rome Finance made false claims to the nature of its loans, masked finance charges with artificially inflated prices, withheld information and illegally collected on voided loans, according to the CFPB.
"Rome Finance lured servicemembers in with the promise of instant financing on expensive electronics, then masked the finance charges with inflated prices in marketing materials and later withheld key information on monthly bills," said CFPB Director Richard Cordray, who added that its business model was built on "fleecing" servicemembers.
The companies offered credit for purchasing products with the promise of instant financing with no money down. Rome Finance has been the subject of previous state and federal enforcement actions and Colfax is currently in Chapter 7 bankruptcy.
The CFPB's consent order requires Rome Finance to provide approximately $92 million in debt relief. All efforts to collect on any of the outstanding Rome Finance financing agreements must cease. Rome Finance still has approximately $60 million in contracts owed by about 12,000 consumers that it will no longer seek to collect.
Separately, a liquidating trust created as part of Colfax's bankruptcy plan will stop collections on approximately $32 million owed by more than 5,000 consumers for Rome Finance's financing agreements. Servicemembers may keep the merchandise they purchased, according to the CFPB.
The targeting of servicemembers for predatory loans has been a recent topic of discussion around the financial industry. Investigative journalism site ProPublica recently published an article detailing practices from a retailer, USA Discounters, that has filed 13,470 lawsuits against servicemembers since 2006.
The article alleges that USA Discounters offers easy credit and is located near many military installations, but that its loan contracts can be misleading, resulting in servicemembers being sued while on deployments, paycheck garnishing and other consequences.
The CFPB's blog features an in-depth look at the Colfax case, and what it means for consumers in the future.
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