Washington, D.C. – The Consumer Financial Protection Bureau (CFPB) today filed a complaint in federal district court against Access Funding, LLC for an illegal scheme in which victims of lead-paint poisoning and others were deceived into signing away future settlement payments in exchange for a significantly lower lump-sum payout. The CFPB alleges that Access Funding steered victims to receive “independent advice” from a sham advisor, an attorney who was actually paid directly by the company and indicated to consumers that the transactions required little scrutiny. In its suit, the CFPB seeks to put an end to the company’s unlawful practices, obtain relief for the harmed consumers, and impose penalties.
“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,” said CFPB Director Richard Cordray. “The Consumer Bureau is fighting to help vulnerable consumers who were swindled out of their settlements, and to prevent future abuses.”
Access Funding is a structured-settlement-factoring company based in Chevy Chase, Md., that operated nationwide. The CFPB’s lawsuit names Access Funding and a successor company, Reliance Funding. The lawsuit also names four individuals: Michael Borkowski, CEO of Access Funding; Raffi Boghosian, Chief Operating Officer of Access Funding; Lee Jundanian, CEO of Access Funding from February 2013 to May 2014; and Charles Smith, a Maryland-based attorney who purportedly provided advice for almost all Maryland consumers who did business with Access Funding.
Structured settlements establish periodic payments of damages for personal injury, often to ensure the well-being of individuals who have suffered long-term physical or cognitive harm. Structured-settlement companies purchase payment streams from settlement recipients in exchange for an immediate lump sum that is usually significantly lower than the long-term payout. Forty-nine states have enacted structured-settlement-protection laws that, among other things, require court approval for the transfer of a settlement. Many states, including Maryland, require that a consumer have consulted with an independent professional advisor before the court will approve a sale.
The CFPB alleges that Access Funding was aware that many of the consumers it targeted had significant cognitive impairments from lead poisoning. According to the Environmental Protection Agency, children six years old and younger are most susceptible to the effects of lead paint poisoning. Even low levels of lead in the blood of children can result in harms including behavior and learning problems, lower IQ, slowed growth, and hearing problems.
Access Funding conducted approximately 70 percent 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 Access Funding provided consumers typically represented only about 30 percent of the present value of those future payments.
The CFPB’s complaint alleges that the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition on unfair, deceptive, and abusive acts and practices. Specifically, the CFPB alleges the defendants:
- Steered consumers to a sham advisor: The CFPB alleges that Access Funding steered Maryland consumers to a single attorney, Charles Smith, who purported to act as the “independent professional advisor” for almost all of its Maryland transactions. The complaint alleges that Smith represented to consumers that he was providing independent advice, but in fact he provided virtually no advice to consumers, and was paid directly by Access Funding.
- Exploited consumers’ confusion to keep deals on track: Access Funding also allegedly offered cash advances to consumers who were awaiting approval of structured-settlement transfers. The company falsely represented to those consumers that they were obligated to proceed with the transactions after receiving the advances, even if the consumer realized it was not in their best interest. These consumers included many with cognitive impairments. The CFPB alleges that the advances did not bind consumers to complete the transactions, and the company and other defendants took advantage of consumers’ lack of understanding of that fact.
The CFPB’s complaint is not a finding or ruling that the defendants have actually violated the law.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.