July 30--In a final federal slapdown, a Bay Area company accused of thousands of fraudulent consumer loans -- primarily against military service members -- was ordered Tuesday to provide $92 million in debt relief to 17,000 consumers nationwide, including more than 1,100 in California. The enforcement action was a joint effort by the federal Consumer Financial Protection Bureau in Washington, D.C., and 13 state attorneys general.
Rome Finance Co., based in Concord, was accused of targeting military members with "instant financing" offers for purchases of pricey electronics -- computers, laptops, gaming consoles and TVs -- often sold in mall kiosks. According to the CFPB's complaint, Rome Finance inflated prices to hide the true finance charges, trapping service members in contracts that "generated millions of dollars for the company and substantial debt for its customers." In some cases, it said, consumers were given documents stating they were paying a 16 percent annual percentage rate, when in actuality, the rate was 100 percent.
"We've been after these guys for a while, so it's kind of the last chapter," said Mark Leyes, spokesman for the state Office of Business Oversight. "In terms of targeting military members, this serves as a warning to anyone else that the state and feds will come after you."
In California, the 1,100 consumers are eligible for up to $6 million in debt relief. Because the company is in bankruptcy protection, however, consumers will not be eligible for financial reimbursement. Rather, any existing contracts or debt payments are canceled. Nationally, that includes $60 million in current contracts held by about 12,000 consumers and $32 million in debt collections owed by more than 5,000 consumers. In addition, the company is obligated to report "payment completed" for those customers' credit reports.
Service members can keep the merchandise they purchased, the CFPB noted.
In 2011, the state reached a settlement with Rome Finance and its owners, who were accused of making loans without a California license and of illegally selling securities.
The company apparently continued making predatory loans under other names, Culver Capital LLC and Colfax Capital Corp., across the country, which led to this week's action.
"Although the name Colfax Capital Corporation might be new to some, this is actually the last gasp of a chameleon-like company with a long and deplorable record of preying on service members," said Holly Petraeus, a CFBP assistant director for service-member affairs, in a blog post on the consumer agency's website. Details on the CFPB's action are at: www.consumerfinance.gov/newsroom.
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