District Court enters $2.8 million judgment in CFPB student debt relief action

Courts CFPB Enforcement State Attorney General State Issues CFPA UDAAP Telemarketing Sales Rule FDCPA Student Lending Debt Relief Consumer Finance Settlement

On March 22, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against one of the defendants in an action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney, alleging a student loan debt relief operation deceived thousands of student-loan borrowers and charged more than $71 million in unlawful advance fees. As previously covered by InfoBytes, the complaint asserted that the defendants violated the CFPA, the Telemarketing Sales Rule, and various state laws. Amended complaints (see here and here) also added new defendants and included claims for avoidance of fraudulent transfers under the Federal Debt Collection Procedures Act and California’s Uniform Voidable Transactions Act, among other things. A stipulated final judgment and order was entered against the named defendant in July (covered by InfoBytes here), which required the payment of more than $35 million in redress to affected consumers, a $1 civil money penalty to the Bureau, and $5,000 in civil money penalties to each of the three states. The court also previously entered final judgments against several of the defendants, as well as a default judgment and order against two other defendants and a settlement with two non-parties (covered by InfoBytes here, here, here, here, and here).

The final judgment issued against the settling defendant, who neither admitted nor denied the allegations except as specifically stated, permanently bans the defendant from participating in telemarking services or offering or selling debt-relief services, and prohibits it from misrepresenting benefits consumers may receive from a product or service. The defendant is also permanently restrained from violating applicable state laws, and may not disclose, use, or benefit from customer information obtained in connection with the offering or providing of the debt relief services. The settlement orders the defendant to pay more than $2.8 million in consumer redress, as well as a $1 civil money penalty to the Bureau and $5,000 to each of the three states.