By Nicole D. Prysby, J.D.
The Bureau settled claims that Monster Loans unlawfully obtained consumers reports, which it passed along to related companies that deceptively marketed student loan debt relief services.
On May 14, 2020, the Consumer Financial Protection Bureau announced a settlement in its lawsuit against Monster Loans and related individual and companies. The Bureau alleged that Monster Loans used its account with credit bureau Experian to unlawfully obtain consumer reports, which it passed along to associated student loan debt-relief companies, which in turn used the consumer reports to deceptively market their services nationwide and then charged consumers illegal fees. The proposed settlement permanently bans the settling defendants from offering or providing debt relief services, using or obtaining prescreened consumer reports, using or obtaining consumer reports for any business purpose other than mortgage lending, and disclosing consumer information. The proposed settlement will also impose a judgment for $18 million, which is suspended subject to disgorgement of profits and $450,001 in civil money penalties.
The Bureau announced that it settled its lawsuit against California mortgage lender Chou Team Realty, LLC, which does business as Monster Loans and several individuals, including Thomas Chou and Sean Cowell (officers of Monster Loans). The Bureau alleged that Chou and Cowell were among the leaders of a scheme to use Monster Loans’ account with a major credit bureau to unlawfully obtain consumer reports for their associated student loan debt-relief companies, which in turn used the consumer reports to deceptively market their services nationwide and then charged consumers illegal fees.
According to the Bureau’s complaint, starting in 2015, Monster Loans purchased prescreened consumer reports from Experian that contained information regarding consumers with student loans, including consumers’ names, addresses, number of student loans, and aggregate student loan balances. Monster Loans certified to Experian that it would use the consumer reports to make offers of credit for mortgage loans. In total, Monster Loans purchased information for seven million consumers with student loans. Rather than using the reports to market mortgage loans, Monster Loans provided them to other companies to market student loan debt-relief services. The Bureau further alleged that the debt-relief service companies contacted the consumers and represented that: (1) the consumers would obtain lower interest rates by consolidating their federal student loans; (2) the consumers would improve their credit scores by consolidating their loans; and (3) the Department of Education would become the "new servicer" on their loans. All of those statements were false, said the Bureau. Additionally, several of these companies unlawfully charged and collected fees of $699 to $999 before consumers’ applications for loan consolidations, loan repayment plans, and loan forgiveness plans were approved and before consumers made payments under the altered terms of their student loans. The Bureau brought claims under the Fair Credit Reporting Act, Telemarketing and Consumer Fraud and Abuse Prevention Act and implementing regulations, and Consumer Financial Protection Act.
The proposed settlement permanently bans the settling defendants from offering or providing debt relief services, using or obtaining prescreened consumer reports, using or obtaining consumer reports for any business purpose other than mortgage lending, and disclosing consumer information. The proposed settlement will also impose a judgment for $18 million against Monster Loans. Full payment of the judgment will be suspended subject to Monster Loans’ payment of $200,000 for consumer redress. The settlement will also require Chou and his company to disgorge $403,750 in profits for the purpose of providing redress and will impose a judgment for redress of $406,150 against Cowell and his company, which will be suspended. These suspended amounts account for these defendants’ limited ability to pay more based on sworn financial statements. If the court enters the proposed settlement, Monster Loans will pay a $1 civil penalty based on its documented inability to pay, Chou will pay a $350,000 penalty, and Cowell will pay a $100,000 penalty. The penalties will be paid to the Bureau and deposited in the Bureau’s Civil Penalty Fund.
Claims against other defendants remain pending, including claims against Lend Tech Loans, a sham entity created by Monster Loans to perpetuate the scheme to unlawfully obtain consumer reports. Lend Tech Loans purported to be a mortgage brokerage, but was only used to unlawfully obtain consumer report information. As alleged in the complaint, because of Monster Loans’ assistance, Lend Tech Loans was able to wrongfully obtain consumer reports for over 12 million additional consumers between 2017 and 2019.
Companies: Chou Team Realty, LLC; Experian; Lend Tech Loans; Monster Loans
MainStory: TopStory CFPB ConsumerCredit DebtCollection EnforcementActions InterestUsury Loans Mortgages
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