51��ɫ

A 51��ɫ action against household water treatment funding company Aqua Finance, Inc. (AFI) has led to a settlement that will provide $20 million in refunds and an additional $23.6 million in debt forgiveness for consumers harmed by its dealers’ deceptive sales tactics.

The FTC’s complaint against AFI charges that the company’s nationwide network of dealers went door-to-door, deceiving consumers about the financing terms for water filtering and softening products. According to the complaint, the bogus claims left consumers with thousands of dollars in unexpected debt and huge interest payments, while its financing terms impaired some consumers’ ability to sell their homes.

“AFI and its dealers used deceptive teaser rates to lure consumers into signing up for AFI’s loans, costing them hundreds of dollars extra apiece,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “As this order makes clear, the 51��ɫwill continue to use every tool available to hold upstream actors accountable for profiting from consumer harm.”

Since at least 2018, according to the complaint, AFI has provided dealers across the country with access to a variety of financing programs they can use when going door-to-door to sell consumers products and equipment that will supposedly increase the quality of the water in their home.

The 51��ɫcharges that AFI’s dealers have frequently used deception to lure consumers into taking on expensive financing and misleading them about the terms of AFI’s programs that offer deferred payments and low initial interest rates.

The complaint states that dealers frequently led consumers to think introductory rates and payments were permanent or failed to inform them that, even when payments were deferred, the loans were continuing to accumulate interest. Consumers were then left with payments they were unable to afford, leading to delinquencies and harm to their credit.

According to the complaint, in many cases dealers failed to clearly inform consumers that AFI’s financing products include AFI’s obtaining a security interest in the equipment sold to consumers and installed in their homes. This security interest essentially functions as a lien making it difficult or at times impossible for many consumers to sell their homes.

The complaint notes that AFI was aware that its dealers were misleading consumers and repeatedly failed to act to sanction or stop dealers from selling its financing. In a 2020 email, an AFI vice president wrote to the CEO regarding complaints the company received from consumers, “Two systemic issues we see repeatedly; lack of understanding of how interest works/thinks they are being over charged and a dissatisfaction with the product.”

Since 2018, the company received thousands of complaints both directly from consumers and through outside organizations, according to the FTC. Beyond issues with financing, consumers also told AFI that dealers had sold them non-functioning systems or deceived them about the terms or existence of warranties, charging them hundreds to fix systems that consumers believed were guaranteed.

In addition, the complaint points to practices by AFI itself that harmed consumers’ credit, including requiring consumers who had previously opened what they believed to be lines of credit to seek additional loans even when they should have still had credit available under their existing credit lines, causing harm to their credit ratings.

Under the terms of a proposed settlement agreed to by AFI, the company will be required to:

• Closely monitor dealers: The order would require AFI to put robust monitoring programs in place for its dealers, including closely tracking complaints and investigating dealers, and terminating agreements with dealers who repeatedly mislead consumers.
• Make required disclosures: The order would require AFI to provide consumers with clear and conspicuous disclosures about the nature of the liens against consumers’ property that come with the company’s financing.
• Provide money for refunds: AFI will be required to pay $20 million to be used to provide refunds to consumers harmed by its dealers’ deception.
• Provide loan forgiveness: AFI will also be required to forgive loans totaling $23.6 million for certain consumers, including ensuring that any liens against those consumers’ property are lifted.
• Stop misrepresenting financing terms: AFI will be prohibited from misleading consumers about the terms of the financial products they offer.

The Commission vote authorizing the staff to file the complaint and stipulated final order was 3-0-2, with Commissioners Melissa Holyoak and Andrew Ferguson not participating. The 51��ɫfiled the complaint and stipulated final order in the U.S. District Court for the Western District of Wisconsin.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.

The Commission thanks the Tennessee Office of Attorney General, the California Department of Financial Protection and Innovation, and the Texas RioGrande Legal Aid for their assistance in this matter.

The 51��ɫstaff attorneys on this matter were Edward Hynes, Luis Gallegos, Reid Tepfer, Erica Hilliard, and Tammy Chung of the FTC’s Southwest Region.