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About 17,000 service members tricked into predatory loans could see their debts erased under a settlement announced by federal and state regulators Tuesday.
Officials connected with Rome Finance, now part of Colfax Capital Corp. and Culver Capital LLC, agreed with the Consumer Financial Protection Bureau and 13 state attorneys general to wipe out $60 million in outstanding loans and stop collections on another $32 million in loans found to be offered under false pretenses.
The California consumer lending company offered no-money-down, instant financing loans for computers, TVs and other electronics at mall kiosks near military bases.
CFPB Director Richard Cordray said in a statement that the firm’s business model was aimed directly at fleecing service members. “Today, their long run of picking the pockets of our military has come to an ignominious end,” Cordray said.
Regulators said the firm masked expensive financing charges by hiking product prices, and withheld billing information from victims while the loan charges grew. In some cases, the types of loans provided were illegal under state law, but company representatives issued and collected on the loans anyway.
Rome Finance and two of its owners already have been permanently banned from consumer lending. Colfax recently declared bankruptcy, but Tuesday’s moves will prevent a liquidating trust formed as part of its bankruptcy plan from collecting on the faulty loans.
Under terms of the agreement, service members may keep any merchandise they purchased, but will not be able to recoup excess finance charges because of the bankruptcy.
The firm also will update credit reporting agencies and service members about their debt status, reflecting the voided loans.
In a statement, Defense Secretary Chuck Hagel called the loan forgiveness moves “an important step in righting this wrong.”
“No one who serves our country in uniform — especially during a time of war — should ever fall victim to predatory financial practices,” Hagel said.
The 13 states involved in the settlement are Colorado, Delaware, Florida, Georgia, Kentucky, Indiana, Iowa, Massachusetts, Michigan, New York, North Carolina, Tennessee and Vermont.
Tuesday’s settlement is the culmination of almost four years of work by the CFPB and attorneys general, prompted initially by reports of predatory loan problems among soldiers at Fort Drum in New York.
More information is on the CFPB website.