Despite laws protecting servicemembers from some forms of shady lending, many continue to fall victim to too-good-to-be-true schemes. One company that offered questionable financing to military borrowers and private citizens has been ordered today to provide millions of dollars in debt relief to the consumers it deceived.
The Consumer Financial Protection Bureau, along with 13 state attorneys general, announced a consent order providing $92 million in debt relief for more than 17,000 servicemembers and other consumers who were harmed by Rome Finance’s alleged predatory lending scheme.
California-based Rome Finance – composed of Colfax Capital Corporation and Culver Capital, LLC – allegedly lured consumers into making purchases of electronics such as computers, televisions and video game consoles, with the promise of no money down and instant financing.
The company would then mask expensive finance charges by inflating the disclosed prices of the consumer goods. To make matters even worse, the company apparently targeted servicembmers by selling goods at mall kiosks located near military bases.
The alleged scheme was initiated when servicemembers and other customers filled out a credit application at the kiosk and, if approved, signed financing agreements that did not accurately disclose the amounts consumers would have to pay.
While Rome Finance was the initial creditor in some cases, in others the company provided indirect financing by agreeing to buy the financing contracts from merchants who sold the goods. The CFPB claims those contracts generated millions of dollars for Rome Finance while piling on mountains of debt for consumers.
But the scheme didn’t end there. The CFPB charges that the company withheld information on billing statements and illegally collected on loans that were void because of the company’s inability under state law to legally collect debts.
Billing statements that were sent to consumers often failed to include certain disclosures required by law, such as the annual percentage rate, the balance subject to that rate and the account balance on the closing date of the billing cycle.
In many instances, Rome Finance was not licensed to provide consumer lending in any state and often charged annual percentage rates higher than allowed by some state laws. In these instances the debt incurred by consumers could not legally be collected by the company.
However, the company allegedly deceived consumers in those states by failing to inform them that some or all of their debt was void or otherwise did not have to be repaid. Instead, many consumers were misled into thinking that they had to repay the entire loan balance and making those payments.
In addition to providing $92 million in debt relief, Rome Finance and its owners are permanently banned from lending. The company must also pay redress to compensate consumers for excess finance charges.
In an odd bit of bookkeeping, Colfax must pay $1 to the CFPB’s Civil Penalty Fund. The value of that penalty is minimal because Colfax is bankrupt, but having that $1 payment on the record means that Rome Finance victims may be eligible for relief from the Civil Penalty Fund in the future.
CFPB and 13 State Attorneys General Obtain About $92 Million in Debt Relief for Servicemembers Harmed by Predatory Lending Scheme [Consumer Financial Protection Bureau]