WASHINGTON Federal and state regulators announced a settlement Tuesday with Colfax Capital Corp. and its subsidiary over charges it "lured" 17,000 U.S. servicemembers into expensive loans with hidden charges and withheld information on billing statements.
Colfax, formerly known as Rome Finance, has already declared bankruptcy as a result of previous state and federal enforcement actions. It will provide $92 million in debt relief, including canceling $60 million in outstanding contracts owned by roughly 12,000 consumers and creating a separate trust as part of its bankruptcy to stop collections on $32 million owed by 5,000 others.
The Consumer Financial Protection Bureau said the California lending company would pay a $1 penalty to its Civil Penalty Fund. It did not assess a larger fine because the firm is already bankrupt.
"Rome Finance's business model was built on fleecing servicemembers," said CFPB Director Richard Cordray in a press release. "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."
The settlement was the result of a joint action by the CFPB and 13 state attorneys general. Regulators accused Rome Finance of providing loans to servicemembers to buy videogame consoles, televisions, and computers, and then artificially inflating the price of the goods being sold. They also said Rome Finance failed to include disclosures required by law, such as the annual percentage rate, the balance that was subject to that rate, and the account balance on the closing date.
Regulators also faulted the lender for "unfairly and abusively" collecting on debt that was not owed since Rome Finance charged annual percentage rates higher than some states allowed, which voided or limited the collectible debt in some states under state lending law.