CFPB enters $ 34.1 million in judgments against debt reduction firms
On May 7, the U.S. District Court for the Central District of California released two default judgments totaling more than $ 34.1 million in a CFPB action against a mortgage lender and several related persons and companies (collectively, the “defendants ”) For alleged violations of the Consumer Financial Protection Act (CFPA), the Telemarketing Sales Rule (TSR) and the Fair Credit Reporting Act (FCRA). Agreements have already been made with the COO / co-owner of one of the defendant companies, as well as with certain other defendants (covered by InfoBytes here, here, and here).
As previously covered by InfoBytes, the Bureau tabled a complaint in 2020, claiming that defendants violated the FCRA, among other things, by illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans stating that the reports would be used to ” make firm credit offers for mortgages’ and to market mortgage products, but instead the defendants allegedly resold or provided the reports to companies engaged in the marketing of student loan debt relief services . The defendants also allegedly violated the TSR by charging and collecting up-front fees for their debt relief services. The CFPB further asserted that the defendants violated the TSR and CFPA when they used telemarketing sales calls and direct mail to encourage consumers to consolidate their loans, and falsely claimed that consolidation could lower bank rates. interest on student loans, improve borrowers’ credit scores and change their agent at the Department of Education.
May 7 Default judgment brought against student loan companies that alleviate debt demands the collective payment of more than $ 19.6 million in consumer redress and more than $ 11.3 million in civil penalties to the bureau. Companies are also permanently prohibited from offering or providing debt relief services or from using or obtaining consumer reports for any purpose. Additionally, businesses and associates may not disclose, use, or benefit from consumer information contained in or derived from pre-screened consumer reports for the purpose of marketing debt relief services.
A second Default judgment was entered on the same day against one of the individual defendants. The judgment requires the defendant to pay a civil fine of more than $ 3.2 million and permanently prohibits him from providing debt relief services or using or obtaining pre-screened consumer reports for whatever purpose.