CFPB Orders Debt Relief Payment Processors to Pay Over $11 Million, Imposes Industry Bans | Hudson Cook, LLP

STRONG POINTS:

  • The CFPB announced an $11 million resolution of Telemarketing Sales Rule and Consumer Financial Protection Act claims against debt relief payment processors and two individuals for allegedly collecting fees inappropriate to consumers, misleading consumers about when fees would be paid to debt relief companies, forwarding fees to debt relief companies before they are legally allowed to do so, and not return funds to consumers who have canceled debt relief agreements.
  • The Respondents neither admitted nor denied the allegations, but consented to an injunction involving an industry ban for one Respondent Company and the two individuals, corrective action for the other Respondent Company (including being subject to the supervisory authority of the CFPB during the term of the consent order), and $8 million in restitution plus a fine of $3 million.

CASE SUMMARY:

On May 11, 2022, the CFPB issued an order against providers of account maintenance and payment processing services to consumers enrolled in traditional student loan and debt relief programs for marketing these services in violation of the telemarketing sales rule and consumer financial protection. Law.

Specifically, the Bureau alleged that the respondents unlawfully collected, processed and disbursed fees from consumers before the consumers’ debts were actually renegotiated or a new payment was made, as required by law. The CFPB further alleged that the defendants misled consumers into believing that they would not pay fees until the debt relief companies they worked with earned them, but did not not confirmed that these fees were actually earned before they were paid. Additionally, the Bureau alleged that the Respondents paid illegal commissions to third-party merchants in exchange for client referrals. The CFPB argued that these practices constituted violations of the Telemarketing Sales Rule, as well as unfair and deceptive acts or practices under the Consumer Financial Protection Act.

The respondents did not admit these allegations, but to resolve the case they accepted an injunction imposing industry bans and remedies, as well as $8,676,180 restitution to consumers and a civil penalty. of $3 million. The order bars one business defendant from the payment processing and account maintenance industry for debt relief while imposing remedial action and oversight authority from the CFPB on the second business defendant. It also imposes industry bans on the two individual defendants for providing “substantial assistance” in prosecuting the alleged violations.

RESOURCES:

You can view all relevant court documents and press releases at The CFPB Application page.

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