Stewart Finance Company and seven related companies have agreed to go out of business and accept a $10 million judgment to settle Federal Trade Commission charges that the companies deceived consumers, many of them elderly.
The FTC said the companies packed optional products such as accidental death and dismemberment insurance and membership in roadside assistance clubs onto small personal loans of $500 or less.
The companies will liquidate their assets in federal bankruptcy court and through a federal district court receivership. Because the companies also owe amounts to other creditors, the FTC does not expect to collect the full amount of its judgment against the defendants. Monies the FTC receives through the bankruptcy and receivership will be combined with amounts due from certain individual defendants and directed to a consumer redress fund.
In a complaint filed in September 2003, the Commission alleged that the defendants deceptively induced consumers to purchase expensive add-on products ancillary to the loan, to participate in a free direct deposit program that was not in fact free, and to incur additional costs and fees by repeatedly refinancing their loans.
The complaint also alleged that the company failed to provide consumers who were denied loans with federally required adverse action notices, and took unlawful security interests in borrowers household goods.
According to the FTC, the Stewart companies violated the FTC Act, the Truth In Lending Act (TILA), its implementing regulation, Regulation Z, the Fair Credit Reporting Act, and the FTCs Credit Practices Rule.
In addition to defendants Stewart Finance Company and the late John Ben Stewart Jr., the FTCs complaint named Stewart Finance Company Holdings, Inc.; Stewart National Finance Company, Inc.; D & E Acquisitions, Inc.; Preferred Choice Auto Club, Inc.; Stewart Insurance, Ltd.; and J & J Insurance, Ltd.
The complaint also named Mr. Stewarts wife, Janice Stewart, and his two sons, William Joseph Stewart and John Benjamin Stewart III. The family members of John Ben Stewart Jr., the deceased company owner, were joined solely as relief defendants and were not charged with any wrongdoing.
The stipulated final order permanently bars the Stewart companies and their principals from participating in any lending or direct deposit business. The stipulated final order also prohibits the companies from failing to disclose clearly and conspicuously the material terms of any loan, from misrepresenting the cost, benefit, or optional nature of any add-on loan products, from soliciting consumers for costly renewal loans, from misrepresenting direct deposit as a free service, or misrepresenting its costs and terms, from violating TILA, from violating the Fair Credit Reporting Act by failing to provide adverse action notices, and from taking security interests in household goods contrary to the Credit Practices Rule.
