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Financial Services Law Insights and Observations

CFPB charges debt-settlement company with TSR and CFPA violations

Federal Issues CFPB Enforcement Telemarketing Sales Rule Courts CFPA

Federal Issues

On December 1, the CFPB announced it filed a complaint in the U.S. District Court for the District of Massachusetts against a Massachusetts-based debt-settlement company alleging violations of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA). According to the complaint, the company violated the TSR and/or the CFPA by, among other things, (i) requesting and receiving payment of fees for their services before they renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to an agreement or before a consumer had made a payment under their agreement; (ii) misrepresenting to consumers that it would not charge fees for its services until it settled a debt and consumers made payments under the settlement to the creditor; (iii) charging fees based on the amount of debt after enrollment instead of the amount of debt at the time of enrollment; and (iv) failing to disclose the amount of time it would take the company to make a settlement offer or the amount of debt the consumer would need to accumulate to make a settlement offer to each creditor. The complaint seeks an injunction against the company as well as damages, redress, disgorgement of ill-gotten gains, and the imposition of civil money penalties.

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