CFPB Settlement to Correct Delays and Monetary Penalty
Bluestem has settle with the CFPB (Bureau of Consumer Financial Protection) on allegations of Consumer Financial Protection Act violations for monetary penalty of $200,000. According to the CFPB the Bluestem group of companies “susbtantially delayed” transferring customer’s payments made to companies they had already sold. They found that Bluestem delayed forwarding of payments for over 31 days 18,000 times, and of those, 3,500 delays lasted more than a year. This means over that time span consumers could have been subjected to collections activity on accounts they had already paid off. Because of this the consumer not only loses the money they could have used to pay off the debt, but also could lead to delinquent accounts to reporting agencies by the debt buyer.
The consent order described the violations,
“Bluestem, an online retailer that operates through several brands, including Fingerhut and Gettington.com, generally sells products, mostly through revolving-credit accounts and installment-credit accounts issued through its third-party partner bank, and sells charged-off accounts to third-party debt buyers. Some consumers continued to make payments on their defaulted accounts directly to Bluestem after their accounts had been sold. Where it received such direct payments, due to operational errors, Bluestem substantially delayed sending some of these consumers’ payments to the thirdparty debt buyers. This practice was likely to subject consumers to misleading debt collection efforts and inaccurate credit reporting, and is unfair under the CFPA.”
Bluestem Settlement Penalties
On top of the monetary penalty the CFPB settlement has mandated that the Bluestone companies to comply with a timely response forwarding customer payments on those accounts they have sold to the third-party debt buyers. Among other things such as preventing payments be made by consumers on sold accounts, whether by phone or through their website. They must notify those that made payments by mail if their accounts have been sold.
CFPB Findings on Bluestem Violations
- When consumers default on their Bluestem accounts, the accounts are charged off and sold to third-party debt buyers. Bluestem does not take affirmative steps to notify consumers when their accounts are sold or to inform consumers of the new owners of their debts.
- Bluestem continued to accept payments from consumers after it had sold their accounts to debt buyers. Bluestem refers to payments on sold debts as “direct pays.”
- Bluestem substantially delayed forwarding some Direct Pays and information about those Direct Pays to debt buyers.
- For example, since 2013 there have been over 3,500 instances where the delay was over 365 days. Between 2013 and August 2016, Bluestem received more than 18,000 Direct Pays-totaling more than $1 million- that it delayed forwarding for at least 31 days.
- By substantially delaying forwarding some Direct Pays and information about those Direct Pays, Bluestem prevented debt buyers from timely updating account balances.
- As a result, debt buyers were likely to subject consumers to misleading and, in situations where consumers have completely paid off their account, completely unnecessary debt-collection efforts.
- Any misleading collection efforts were likely to cause consumers to make payments based on debt buyers’ misstatements about the amounts owed on consumers’ accounts, including in situations where consumers had completely paid off their accounts.
- Bluestem’s conduct was also likely to cause some debt buyers to furnish
inaccurate information to consumer-reporting agencies.
- Consumers have no reason to anticipate that Bluestem will accept their payments but then hold the payments for months or years before forwarding them. And so consumers have no reason to anticipate the inaccurate debt collection or consumer reporting that could result.
Violation of the CFPA
22. Section 1036(a)(1)(B) of the CFPA prohibits “unfair” acts or practices. 12 U.S.C. § 5536(a)(1)(B). An act or practice is unfair if it causes or is likely to cause consumers substantial injury that is not reasonably avoidable and is not outweighed by countervailing benefits to consumers or to competition. 12 U.S.C. § 5531(c)(1).
Consumers were likely to suffer substantial injury because Bluestem’s practice precluded debt buyers from timely updating account balances. As a result, consumers were likely to be subjected to misleading and, in situations where consumers have completely paid off their account, completely unnecessary debt-collection efforts; consumers were likely to make payments based on debt buyers’ misstatements about the amounts owed on consumers’ accounts, including in situations where consumers have completely paid off their accounts; and some debt buyers were likely to furnish inaccurate information to consumer-reporting agencies
The complete consent order can be found here.