By Benjamin Goad - 07/29/14 02:54 PM EDT
Credit firms will forgo $92 million in outstanding debt after federal and state authorities accused them of “fleecing” thousands of U.S. military members with hidden charges on electronics purchases, regulators said Tuesday.
The Consumer Financial Protection Bureau and attorneys general from 13 states obtained the debt relief from Colfax Capital Corporation and Culver Capital, LLC, known collectively as Rome Finance, CFPB Director Richard Cordray said.
The transactions largely took place at kiosks at malls near military bases and involved the companies masking the finance charges with inflated prices in marketing materials. Subsequent monthly bills omitted key information, officials said.
“Rome Finance’s business model was built on fleecing service members,” said CFPB Director Richard Cordray. “Today, their long run of picking the pockets of our military has come to an ignominious end.”
The CFPB is empowered under the Dodd-Frank Wall Street Reform law to take enforcement action against firms implicated in such schemes. Under the terms of a consent order, the firms associated with Rome Finance must cease collections on roughly $60 million in contracts still in effect for an estimated 12,000 consumers.
Collections on an additional $32 million owed by 5,000 more consumers that have continued through a related liquidating trust created as part of Colfax’s bankruptcy filing are also halted under the order.
Service members will be allowed to keep all of the products obtained through the fraudulent deals, the CFPB said.