The Consumer Financial Protection Bureau filed a lawsuit Monday against a Maryland company that allegedly targeted victims of lead paint poisoning and got them to sign away future settlement payments for immediate cash at a deep discount.
The CFPB's lawsuit against the structured-settlement company Access Funding of Chevy Chase, Md., is similar to a suit filed in May by Maryland Attorney General Brian Frosh. Both lawsuits allege the company and a successor firm, Reliance Funding, aggressively targeted Baltimore City adults between the ages of 18 and 26 who had lead paint poisoning as children. The company offered lump-sum payments that represented roughly 30 cents on the dollar, the CFPB said.
"Many of these struggling consumers were victimized first by toxic lead, and second by a company that saw them as little more than income streams to be courted and harvested," CFPB Director Richard Cordray said in a press release. "The Consumer Bureau is fighting to help vulnerable consumers who were swindled out of their settlements, and to prevent future abuses."
Freddie Gray, the Baltimore man whose death in police custody in 2015 sparked violent protests, suffered lead paint poisoning as a child and had sold part of a structured settlement to Access Funding. The company also faces a pending class-action lawsuit.
Access Funding conducted approximately 70% of its settlement transfers in Maryland; the company sought court approval for approximately 200 transfers in Maryland from 2013 to 2015, of which at least 158 have been approved. Consumers received a steeply discounted lump sum in return for signing away their future payment streams. The lump sums that Access Funding provided consumers typically represented only about 30% of the present value of those future payments.
The CFPB alleges that Access Funding engaged in unfair or deceptive practices, as well as fraud, by falsely asserting that its customers had received independent professional advice to transfer their structured settlements.
In 2000, the Maryland General Assembly passed a law requiring that consumers receive independent advice before a court could approve the transfer of a structured settlement. It is still unclear how the company was able to receive court approval for 158 settlement transfers, of 200 sought in Maryland from 2013 to 2015.
The CFPB said Access Funding steered victims to Charles Smith, who acted an independent adviser but was paid by the company. Access Funding also offered cash advances to consumers who were waiting approval of structured-settlement transfers.
The CFPB seeks to put an end to the company's unlawful practices, obtain relief for the harmed consumers and impose civil money penalties.
The bureau's lawsuit, filed in U.S. District Court in Baltimore, named four individuals: Michael Borkowski, CEO of Access Funding; Raffi Boghosian, chief operating officer; Lee Jundanian, a former CEO known as the "grandfather" of structured settlements; and Smith, the attorney who purportedly gave advice to Maryland consumers but was paid by Access Funding.