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CFPB Settles with Andrew Gamber for Sale of Contracts Offering High Interest Credit

On August 14, 2019, the Bureau filed a complaint and a proposed stipulated final judgment and order with Andrew Gamber and three financial institutions owned by Mr. Gamber.  According to the Bureau’s complaint, Mr. Gamber, through the companies, misrepresented and brokered contracts offering high-interest credit to consumers.  The Bureau’s stipulated order includes: (i) a permanent ban from the industry; (ii) $2.7 million in redress; (iii) $1 civil money penalty to the Bureau; and (iv) $75,000 to the Arkansas’s AG Consumer Education and Enforcement Fund.

The Bureau’s complaint alleges violations of the Consumer Financial Protection Act of 2010, 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, the Arkansas Deceptive Trade Practices Act, Ark. Code Ann. § 4-88-101, et seq., and the Arkansas Constitution as amended by Amendment 89, §3.  The complaint alleges that Mr. Gamber, through the companies, set up contracts between consumers (including veterans) and investors where the consumers were to receive lump-sum payments to be repaid with assignments of the consumers’ monthly pension or disability benefits.  The credit offers were marketed to consumers as a sale of the consumers’ future pension or disability payments and not as loans; therefore, the products’ interest rates were not disclosed.  In addition, consumers were required to purchase life insurance policies to cover the outstanding amount on the contract if the consumer died.  According to the complaint, some consumers also experienced delays in receiving funds by the dates specified on the respective contracts.

Federal law prohibits any agreement or arrangement under which a person assigns its right to receive payments of veteran’s benefits and deems such agreements void since inception.  38 U.S.C. § 5301(a).  In addition, South Carolina law, which governed these contracts, prohibits the assignment of earnings “for payment or as a security for payment of a debt,” and deems such assignments unenforceable.  S.C. Code § 37-3-403.

The parties agreed to the entry of the stipulated final judgment and order without adjudication of any issue of fact or law.  The defendants neither admitted nor denied any allegations in the complaint.  In addition to the monetary penalties mentioned above, the Bureau’s stipulated order includes a permanent ban from brokering, offering, and arranging agreements between pension-recipients and third parties under which a pension-recipient sells a future right to a portion or all of its income stream.  The $2.7 million redress payment will be suspended upon payment of $200,000, the Bureau’s $1 civil penalty, and $75,000 to the State of Arkansas due to Mr. Gamber’s inability to make additional payments.  Mr. Gamber’s inability to pay is based on his sworn financial statements signed on or about March 25, 2019.