The company is accused of taking advantage of consumers with cognitive impairments
The Consumer Financial Protection Bureau (CFPB) has filed a complaint in federal district court against Access Funding alleging that the company scammed victims of lead paint poisoning out of settlement money.
Access allegedly deceived these consumers and others into signing away future settlement payments to which they were entitled in exchange for a significantly lower lump-sum payout. According to the CFPB, Access guided its victims into receiving "independent advice" from a sham advisor, a lawyer paid directly by the company who indicated to consumers that little scrutiny over the transactions was necessary.
The agency is seeking to end Access's illegal practices, obtain relief for its victims, 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 is a structured-settlement-factoring company that operated across the country. Both it and a successor company, Reliance Funding, are named in the lawsuit, as well as 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, an attorney who allegedly gave advice to nearly all consumers in Maryland who did business with Access.
Structured settlements put into place periodic personal injury damages payments, frequently to ensure the well-being of people who have experienced physical or cognitive harm over a long period of time. These companies buy payment streams from people who receive settlements in exchange for an immediate lump sum amount usually significantly lower than the payout would be in the long term. Structured-settlement-protection laws have been enacted in 49 states to, among other provisions, require a court to approve any settlement transfers. Several states require consumers to consult with an independent professional advisor before it will approve such a sale.
The CFPB claims that Access Funding knew that several of the consumers it targeted had experienced significant cognitive impairments due to lead poisoning. According to the Environmental Protection Agency, those most susceptible to the effects of lead paint poisoning are children six years old and younger. Even low lead levels in children's blood can lead to damage, including behavioral and learning problems, lower IQs, slowed growth rates, and problems hearing.
Access carried out roughly 70 percent of its settlement transfers in Maryland. It sought the approval of the court for around 200 such transfers there from 2013 to 2015, and at least 158 of those transfers have been approved. Victims got a steeply-discounted lump sum payout in exchange for signing away their future payment streams. The lump sums provided by Access generally represented only about 30 percent of the current value of those future amounts.
The complaint filed by the CFPB claims that the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act's prohibition of unfair, deceptive, and abusive acts and practices. It makes the following specific allegations, claiming that Access:
- Guided consumers to a sham advisor. Access allegedly guided consumers in Maryland to one attorney, Charles Smith, who supposedly acted as the "independent professional advisor" for nearly all of the company's transactions in Maryland. The complaint claims that Smith represented to Access's victims that he was providing them with independent advice, while in reality he provided virtually no advice and was paid directly by Access.
- Exploited consumers' confusion with the purpose of keeping deals on track. Access is also accessed of offering cash advances to those consumers waiting for approval of structured-settlement transfers. It falsely claimed that they were required to go through with the transactions after they received the advances, even if the victim realized that doing so was not in his or her best interest. Such consumers included several with cognitive impairments. According to the CFPB, consumers were not bound by the advances to proceed with the transactions, and the defendants took advantage of the fact that the consumers did not know this.