Equipment for treating water that dealers sold door-to-door was financed by Aqua Finance. However, the FTC claims that the business hid the reality and left behind a trail of unfair and dishonest financing techniques that left many customers with unanticipated debt and made it more challenging for some of them to sell their houses. The outcome is a $43.6 million settlement that is being offered, along with strong injunction clauses that will alter the company’s future business practices. Continue reading for information about how the FTC claims Aqua Finance also broke the Fair Credit Reporting Act, including a complaint charge that is first of its type, even if financing is not a component of your firm.
Credit was made available to customers who purchased water treatment products from dealers licensed by Wisconsin-based Aqua Finance. It would be an understatement to say that sales were anything but insignificant. The complaint states that Aqua Finance has funded, serviced, and collected on over 297,000 credit agreements, amounting to more over $1 billion in sold systems, since at least January 2018.
According to the FTC, several dealers misrepresented the details of the transaction to make it appear less expensive than it actually was in order to entice customers to sign on the dotted line. According to the complaint, dealers regularly misled customers—many of whom were elderly or Latino customers—into believing that cheaper introductory rates and payments would remain in place. Additionally, it is alleged that dealers neglected to adequately warn customers that interest would continue to accrue on their loans even in cases where payments were postponed. According to the FTC, Aqua Finance’s actions have left numerous customers in a precarious financial situation.
For information on the financing practices that are allegedly unfair and misleading in accordance with the FTC Act, you should read the complaint. According to the FTC, Aqua Finance also broke the Truth in Lending Act and Regulation Z by neglecting to provide customers with the written disclosures that the law mandates in order for them to make educated credit decisions.
Special attention should be paid to another claim. According to the FTC, Aqua Finance omitted to reveal, on multiple occasions, that a provision in its credit documentation permitted the business to file a “fixture filing” in accordance with the Uniform Commercial Code. Typically, property is separated into “chattel,” such as a huge appliance, and “fixtures,” which are objects that practically become a part of the house. That clause had significant implications for homeowners, despite the fact that it may seem like a technical legal distinction.Many clients found it difficult or impossible to sell their homes due to Aqua Finance’s creation of a security interest that functioned as a lien by creating a “fixture filing” for the water treatment systems. According to the lawsuit, Aqua Finance engaged in deceptive behavior by failing to appropriately disclose that material information, which is against the FTC Act.
Additionally, the lawsuit claims that the Fair Credit Reporting Act’s consumer protections have been violated numerous times. For instance, the FTC claims that Aqua Finance neglected to put in place appropriate documented standards and processes regarding the integrity and accuracy of the data it provided to consumer reporting agencies (CRAs). Aqua Finance is accused of neglecting to look into consumer complaints about disputed material in their credit reports, not informing the credit reporting agencies (CRAs) of the disputed information, and failing to relay the findings of its investigations to consumers.
In what is allegedly the first-ever FTC Fair Credit Reporting Act lawsuit, Aqua Finance is accused of improperly managing customer reports of identity theft. Companies cannot report negative information to a CRA under Section 623(a)(6)(B) of the FCRA if customers alert them through identity theft reports that an account is the result of identity theft. According to the FTC, Aqua Finance continued to provide CRAs with information about those questionable accounts even after customers provided police reports or other official identity theft documents to the company.
The proposed settlement offers a $43.6 million financial remedy, which consists of $20 million in consumer refunds and an additional $23.6 million in debt forgiveness for individuals who were allegedly misled by dealers using illegal sales practices. Furthermore, Aqua Finance needs to implement a strong mechanism to keep an eye on its dealers, record complaints, and fire any dealer who consistently misleads customers. In addition, the business must quit misrepresenting finance conditions and provide clients with accurate information regarding credit rates and terms as well as any liens against their property.
What lessons can be drawn by other businesses from the FTC’s lawsuit against Aqua Finance?
When there’s smoke in the water, act fast. The complaint claims that Aqua Finance disregarded alerts regarding the unfair or dishonest business practices of dealers and carried on profiting from their illicit activity. For instance, the Federal Trade Commission claims that despite hundreds of complaints against a single dealer being included in the company’s internal database, business continued as usual when it came to the financial benefits. Additionally, Aqua Finance disregarded the numerous grievances filed against a different dealer who had previously been found guilty of fraud and mandated to make reparation payments totaling more than $100,000.Up until it learned of a state AG investigation that was still continuing, Aqua Finance kept doing business with that dealer and profiting from those sales. The lesson for other companies is to act swiftly upon receiving information about dubious behavior and to stop keeping profits from transactions you have cause to suspect may be unlawful.
Eliminate unfairness and deceit from credit transactions. In order to “ensure a meaningful disclosure of credit terms” and “protect the consumer against inaccurate and unfair credit billing… practices,” Congress created the Truth in Lending Act. Companies have an obligation to be completely transparent with their clients regarding financing terms under TILA, Reg Z, and the FTC Act. These pillars are undermined by murky costs, complex conditions, and confusing “teaser” rates.
How are you making sure that the FCRA is followed? It’s not simply good business sense to have written procedures in place for the Fair Credit Reporting Act that you execute and oversee. It is mandated by law. Additionally, take extra caution while responding to customer allegations of fraud or identity theft. It can be similar to swimming against a strong current to fight back against identity theft. This is the reason the law gives consumers who have been harmed particular protections. Don’t cause them more harm than good by disobeying the FCRA’s explicit mandates. Is your organization in need of a compliance check?