CFPB fines Fingerhut parent for delaying payments

The Consumer Financial Protection Bureau entered into a consent decree with Bluestem Brands, Bluestem Enterprises and Bluestem Sales to resolve allegations of misdeeds on the part of the company.

The Consumer Financial Protection Bureau entered into a consent decree with Bluestem Brands, Bluestem Enterprises and Bluestem Sales to resolve allegations of misdeeds on the part of the company.

Bluestem, which is the parent company of Fingerhut, had allegedly mishandled consumer payments collected by them for debts they had already sold to third-party buyers. Bluestem has agreed to pay $200,000 in fines to the bureau.

According to the consent order, Bluestem partnered with an outside bank to issue revolving credit to consumers. Bluestem serviced these debts itself. However, when consumers defaulted on their credit agreement, the accounts were charged off and sold to third-party debt buyers. The CFPB alleges that Bluestem did not take adequate affirmative steps to notify consumers that their loan had been sold. As a result, some consumers continued to send payments to Bluestem. Bluestem then delayed passing on these payments and other account information to the third-party buyers.

Bluestem violated the Consumer Financial Protection Act by engaging in “unfair” practices, the bureau says. The consent order alleges that since 2013 there were over 3,500 instances where the delay was longer than one year. Between 2013 and 2016, Bluestem received more than 18,000 payments totaling more than $1 million that were delayed at least 31 days. The delays prevented the debt-buyers from updating their systems. Some Bluestem consumers were then mistakenly targeted by debt-collection efforts when in fact their accounts had been paid off. Some consumers had inaccurate information passed on to credit reporting agencies.

Under the terms of the consent order, Bluestem agreed to make changes to its “processes, systems and controls” to ensure that they will forward payments and information to third-party buyers in a timely fashion. In addition, Bluestem must take steps to ensure that they will not accept payments over the phone or through their website after an account has been sold, that they will inform consumers of the fact that their account has been sold and that they will provide the contact information of the third-party buyer directly to the consumer. Finally, Bluestem will be subject to compliance monitoring by the CFPB.

The CFPB noted that the failure to update the third-party debt buyers was “due to operational errors” and not an intent to deceive. The consent order states that many of the delays resulted from a conversion of Bluestem’s accounts receivable system in March of 2014.