WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) and 13 state attorneys general obtained approximately $92 million in debt relief from Colfax Capital Corporation and Culver Capital, LLC, also collectively known as “Rome Finance,” for about 17,000 U.S. servicemembers and other consumers harmed by the company’s predatory lending scheme. Rome Finance lured consumers with the promise of no money down and instant financing. Rome Finance then masked expensive finance charges by artificially inflating the disclosed price of the consumer goods being sold. Rome Finance also withheld information on billing statements and illegally collected on loans that were void. Rome Finance and two of its owners are permanently banned from consumer lending.
“Rome Finance’s business model was built on fleecing servicemembers,” said CFPB Director Richard Cordray. “Rome Finance lured servicemembers in with the promise of instant financing on expensive electronics, then masked the finance charges with inflated prices in marketing materials and later withheld key information on monthly bills. Today, their long run of picking the pockets of our military has come to an ignominious end.”
Colfax, formerly known as Rome Finance Co., Inc., is a California consumer lending company and Culver is its wholly owned subsidiary, formerly known as Rome Finance LLC. The companies offered credit to consumers purchasing computers, videogame consoles, televisions, or other products. These products were typically sold at mall kiosks near military bases with the promise of instant financing with no money down. In some cases, Rome Finance was the initial creditor, and in other cases, Rome Finance provided indirect financing by agreeing to buy the financing contracts from merchants who sold the goods.
Servicemembers and other consumers would fill out a credit application at the kiosk and, if approved, sign financing agreements that did not accurately disclose the amounts they would have to pay for that financing. These contracts generated millions for Rome Finance while weighing down consumers with expensive debt. Rome Finance has been the subject of previous state and federal enforcement actions and Colfax is currently in Chapter 7 bankruptcy. The CFPB and state attorneys general uncovered substantial evidence that Rome Finance’s lending scheme violated several laws and that these illegal practices harmed approximately 17,000 consumers. The CFPB in its consent order found that Rome Finance:
- Hid finance charges when marketing products: Rome Finance and merchants it worked with masked expensive finance charges by artificially inflating the disclosed price of the consumer goods being sold. As a result, they provided consumers with disclosures that had inaccurately low finance charges and annual percentage rates (APR). Consumers received disclosures, for example, indicating the APR was 16 percent when in fact the APR was 100 percent or more. That inaccurate information prevented consumers from making an informed decision about whether to take out credit.
- Withheld required financial information from billing statements: Billing statements that Rome Finance sent to consumers failed to include certain disclosures required by law such as: the annual percentage rate, the balance that was subject to that interest rate, how that balance was determined, the closing date of the billing cycle, and the account balance on the closing date.
- Deceptively, unfairly, and abusively collected debt that was not owed: Rome Finance was not licensed to provide consumer lending in any state and charged annual percentage rates higher than some states allowed, which voided or limited the collectable debt in some states under state lending law. Rome Finance deceived consumers in these states by failing to inform them that some or all of their debt was void or otherwise did not have to be repaid. As a result, many consumers were misled into thinking that they had to repay the entire loan balance and making those payments, when they did not have to.
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices. The Truth in Lending Act also authorizes the CFPB to take action against creditors who do not accurately disclose the cost of credit and other credit terms to consumers. To address these violations, the CFPB’s consent order requires Rome Finance to:
- Provide approximately $92 million in debt relief: All efforts to collect on any of the outstanding Rome Finance financing agreements must cease. Rome Finance still has approximately $60 million in contracts owed by about 12,000 consumers that it will no longer seek to collect. Separately, a liquidating trust created as part of Colfax’s bankruptcy plan will stop collections on approximately $32 million owed by more than 5,000 consumers for Rome Finance’s financing agreements. Servicemembers may keep the merchandise they purchased.
- Update credit reporting agencies and notify servicemembers and other consumers of debt status: The Colfax Trustee must update the credit reporting agencies so that affected consumers are listed as having paid their debt. The Colfax Trustee must also notify all affected consumers that their debt will no longer be collected.
- Rome Finance and their owners must cease consumer lending: Rome Finance and two of their owners, Ronald Wilson and William Collins, are permanently banned from conducting any business in the field of consumer lending.
- Pay redress for hidden finance charges: Rome Finance was ordered to pay redress to compensate affected consumers for the amount of excess finance charges they paid. When Colfax’s Trustee has complied with certain provisions of the Consent Order, the requirement to pay redress will be suspended because Rome Finance has no ability to pay such redress.
- Pay civil money penalty: For its inaccurate disclosures, and unfair, deceptive, and abusive practices, Colfax, through its bankruptcy trustee, will make a $1 penalty payment to the CFPB’s Civil Penalty Fund. The Bureau is not assessing a larger penalty because Colfax is bankrupt. With Colfax making a payment to the Civil Penalty Fund, Rome Finance’s victims may be eligible for relief from the Civil Penalty Fund in the future, although that determination has not yet been made.
- Cooperate with servicemembers and other consumers who seek to vacate judgments: The Colfax Trustee is required until the Colfax bankruptcy case is closed to cooperate in executing any documents presented to him to vacate or satisfy any judgments against consumers relating to the financing agreements.