CFPB Enforcement Action Targets Debt Settlement Payment Processing

Posted on October 3rd, 2013 in Consumer Finance, Federal Issues By BuckleySandler

On October 3, the CFPB announced an enforcement action against a leading debt-settlement payment processor and its President/CEO for allegedly assisting clients in the debt-settlement industry charge and collect millions of dollars in unlawful fees since October 2010.  According to the complaint, the defendants “knew or consciously avoided knowing” that the company’s services were used to charge illegal upfront fees in violation of the Telemarketing Sales Rule to more than 11,000 consumers across multiple states.  The defendants agreed to a consent order that will:  (i) prohibit the company from processing payments for debt-settlement companies and for members of the related mortgage-settlement industry going forward; (ii) subject the parties to regular monitoring by and reporting to the CFPB, as well as recordkeeping requirements; and (iii) mandate a civil money penalty of $1.376 million.  On the date announced, Deputy Director Steve Antonakes remarked that the action should send a message that the CFPB is “working to ensure federal consumer laws are being followed at every stage of the process, including taking action against those who unlawfully facilitate illegal conduct of others.”

The CFPB has already taken action against the debt-settlement companies themselves, obtaining judgments against two companies in 2012 and 2013 and filing a complaint against four others in May.

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