Restitution of $20 million set aside – and penalties assessed – to pay for bank’s unfair, deceptive practices

Although the exact amount of restitution has not yet been finally determined, $20 million to provide restitution to harmed consumers has been placed in a segregated account, and fines of more than $1 million have been assessed, against a New Jersey bank and its California “institution-affiliated” party for unfair and deceptive practices, the Federal Deposit Insurance Corp. (FDIC) said Wednesday.

The federal deposit insurer said in a release it has reached settlements with Cross River Bank, Teaneck, N.J., and its institution-affiliated party, Freedom Financial Asset Management, LLC (FFAM), San Mateo, Calif., for unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission (FTC) Act related to the marketing and origination of Consolidation Plus Loans (C+ Loans).

The FDIC also said it found that the bank and the asset management company violated the Truth in Lending Act (TILA) and Electronic Fund Transfer Act (EFTA).

The agency said $20 million has been placed in a segregated account for the purpose of providing restitution to harmed consumers (although an exact amount has yet to be determined). FDIC said it also assessed civil money penalties of $641,750 against the bank, and $493,500 against FFAM.

Cross River Bank and FFAM stipulated to the issuance of respective Consent Orders, Orders for Restitution, and Orders to Pay Civil Money Penalties, FDIC said.

According to the agency, Cross River Bank originates the “C+ Loans,” an unsecured debt consolidation loan product, through FFAM. “C+ Loans are offered exclusively to consumers who contract with Freedom Debt Relief (FDR), a FFAM-affiliated debt settlement company,” the FDIC said. “C+ Loans were marketed as a way for consumers to quickly resolve their outstanding debts. Consumers are charged a settlement fee of up to 25 percent of each debt enrolled in FDR’s program.”

The FDIC said it determined that Cross River Bank and FFAM violated federal law prohibiting unfair and deceptive practices, by, among other things:

  • Requiring borrowers to sign loan documents without knowing the essential terms and conditions of the loan;
  • Failing to inform borrowers that certain major creditors will not negotiate debts with FDR and including related debt settlement fees into C+ Loans, when in fact, borrowers had to negotiate such debts themselves;
  • Misrepresenting to consumers that the C+ Loans would result in the settlement of all their debts within 30 to 45 days or 30 to 90 days, which was not true for nearly half of the consumers; and
  • Misrepresenting that the consumers’ creditworthiness would improve by obtaining a C+ Loan.

“As the originator of these loans, Cross River Bank is responsible for ensuring the C+ Loans program operates in compliance with all applicable laws,” the FDIC said.

The agency noted that consumers who are eligible for relief under the settlement are not required to take any action to receive restitution.

FDIC Announces Settlement with Cross River Bank, Teaneck, New Jersey, and Freedom Financial Asset Management, LLC, San Mateo, California, for Unfair and Deceptive Practices