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  • FTC settles over illegal telemarketing practices

    Federal Issues

    On July 16, the FTC announced a $1.6 million settlement with a New Jersey-based septic tank cleaning company, its officers, and an individual connected to the officers (collectively, “defendants”) for allegedly making illegal robocalls to consumers, including tens of millions of calls to numbers listed on the FTC’s Do Not Call Registry. The complaint, which was filed on behalf of the FTC by the DOJ in July, alleged that the defendants violated the FTC Act and the Telemarketing Sales Rule, among other things, by engaging in illegal telemarketing practices, including the use of prerecorded messages. The defendants allegedly falsely told consumers they were calling from an unnamed “environmental company” to provide consumers with “free info” regarding their septic tank cleaning products. In addition, the defendants allegedly sent letters to customers “threatening to direct their purportedly delinquent accounts to a collection agency or legal department even though [the company] never intended to send customer accounts to either a collections agency or legal department.” Under the terms of the stipulated final order, the defendants are, among other things: (i) permanently banned from engaging in telemarketing; (ii) prohibited from making misrepresentations to consumers regarding referrals to attorneys or collection agencies or material facts concerning goods or services; (iii) prohibited from billing or attempting to collect payments from any consumers connected to the sale of their septic tank cleaning products; and (vi) required to notify all customers with unpaid balances that their balances have been cancelled. A $10.2 million monetary judgment will be partially suspended after the officers pay approximately $1.6 million and the individual pays $15,000 to the U.S. Treasury.

    Federal Issues FTC Enforcement DOJ FTC Act Telemarketing Sales Rule

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  • District Court approves $35 million settlement in student debt-relief action

    Courts

    On July 14, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against the named defendant in a 2019 action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney. which had alleged 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. A second amended complaint also included claims for avoidance of fraudulent transfers under the FDCPA and California’s Uniform Voidable Transactions Act.

    In 2019, the named defendant filed a voluntary petition for Chapter 11 relief, which was later converted to a Chapter 7 case. As the defendant is a Chapter 7 debtor and no longer conducting business, the Bureau did not seek its standard compliance and reporting requirements. Instead, the finalized settlement prohibits the defendant from resuming operations, disclosing or using customer information obtained during the course of offering or providing debt relief services, or attempting “to collect, sell, assign, or otherwise transfer any right to collect payment” from any consumers who purchased or agreed to purchase debt relief services. The defendant is also required to pay 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 previously entered final judgments against several of the defendants, as well as a default judgment and order against two other defendants (covered by InfoBytes here, here, here, and here).

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

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  • FTC settles with payment processors in student loan debt relief scam

    Federal Issues

    On July 12, the FTC announced a settlement with two Florida-based payment processing companies and their CEO (collectively, “defendants”) accused of participating in a student loan debt relief scam. As previously covered by InfoBytes, in 2018, the FTC alleged the student loan debt relief operation violated the FTC Act and the Telemarketing Sales Rule (TSR) by, among other things, falsely claiming borrowers had pre-qualified for federal loan assistance programs that would reduce their monthly debt payments or result in total loan forgiveness and accepting monthly payments that were not applied towards student loans. A settlement was reached last December (covered by InfoBytes here). According to the FTC’s most recent complaint, the defendants allegedly “applied for and obtained merchant accounts for the [scam] by knowingly and repeatedly providing false information to payment processors about the [operation’s] three companies.” The defendants’ payment processing applications, the FTC contended, concealed the fraudulent activity, denied that the operation was offering consumers prohibited debt relief services, and repeatedly ignored warnings and direct evidence that the operation was defrauding consumers.

    Under the terms of the settlement order, the defendants are permanently banned from payment processing or acting as an independent sales organization or sales agency. The defendants are also prohibited from assisting and facilitating any unfair and deceptive trade practice, including to obtain payment processing services. In addition, the order imposes a $28.6 million judgment against the defendants, which is partially suspended following the payment of $20,493, due to the defendants’ inability to pay the full amount.

    Federal Issues FTC Enforcement Payment Processors Student Lending Debt Relief Consumer Finance UDAP FTC Act Telemarketing Sales Rule

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  • District Court’s order targets debt settlement firm’s abusive acts

    Courts

    On July 2, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against an online debt-settlement company to resolve CFPB allegations concerning violations of the TSR and the CFPA’s prohibition on abusive acts or practices. As previously covered by InfoBytes, the Bureau filed a complaint against the company in April claiming it took “unreasonable advantage of consumers’ reasonable reliance that [the company] would protect their interests in negotiating their debts” by failing to disclose its relationship to certain creditors and steering consumers into high-cost loans offered by affiliated lenders. The Bureau also alleged that the company regularly prioritized creditors with which it had undisclosed relationships when settling consumers’ debts. Under the terms of the order, the company—who neither admits nor denies the allegations except as specified—is required to pay approximately $646,769 in redress and a $750,000 civil money penalty. The company is also (i) prohibited from settling consumers’ debts owed to any affiliated company with which it shares direct or indirect ownership; (ii) required to disclose to consumers any affiliation with any provider of the specific loans; and (iii) required to notify consumers with currently enrolled debts that it will no longer seek to settle those debts. Additionally, the company is required to comply with the TSR when marketing or selling any debt relief products or services, including by providing accurate disbursement amounts, not charging settlement-performance fees, clearly disclosing estimated costs, and not misrepresenting any material facts.

    Courts CFPB Enforcement Abusive UDAAP Consumer Finance Settlement Debt Collection Debt Settlement Telemarketing Sales Rule CFPA

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  • District Court approves $6.02 million settlement in student debt-relief action

    Courts

    On July 1, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against two defendants in a 2019 action brought by the CFPB, the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney, which alleged 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 alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the complaint asserted the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments.

    The finalized settlement issued against the two relief defendants, who neither admit nor deny the allegations except as specifically stated, requires the payment of $3.98 million by one defendant and $2.04 million by the other. However, based on the defendant’s inability to pay, full payment of the $2.04 million will be suspended. The finalized settlement also ordered the paying relief defendant to disgorge any funds held in accounts in excess of the $3.98 million, “including any income such as interest, dividends, and capital gains, as of the date the funds are transferred.” Moreover, both relief defendants are required to grant all rights and claims of identified assets to the Bureau, as well as any assets “currently in the possession, custody, or control of the Receiver.”

    The court previously entered final judgments against several of the defendants, as well as a default judgment and order against two other defendants (covered by InfoBytes here, here, and here). Orders have yet to be entered against the remaining defendants.

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

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  • District Court approves new settlement in student debt-relief action

    Courts

    On June 15, 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 in 2019, which alleged 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 alleged that the defendants violated the Consumer Financial Protection Act, the Telemarketing Sales Rule, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the complaint asserts the defendants engaged in deceptive practices by misrepresenting (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness; and (iii) their ability to actually lower borrowers’ monthly payments.

    The finalized settlement issued against the relief defendant—who acted in an individual capacity and also as trustee of a trust, and who neither admits nor denies the allegations—requires the liquidation of certain assets up to but not exceeding $3 million as monetary relief to go to the CFPB and the People of the State of California. If the liquidation value of the asset is less than $3 million, the relief defendant “will be additionally liable for the difference between the liquidation value of the [asset] and $3,000,000, up to but not exceeding $500,000.” The relief defendant is also liable to all plaintiffs for $88,381.80. In addition, the relief defendant must comply with certain reporting and recordkeeping requirements and fully cooperate with the plaintiffs.

    The court previously entered final judgments against four of the defendants, as well as a default judgment and order against two other defendants (covered by InfoBytes here and here). Orders have yet to be entered against the remaining defendants.

     

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

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  • FTC settles with remaining operators of student loan debt-relief scam

    Federal Issues

    On May 17, the FTC announced settlements to resolve litigation against the remaining defendants involved in a student loan debt-relief operation charged with allegedly engaging in deceptive and abusive practices by collecting advance fees and making false promises to consumers that they could lower or eliminate loan payments or balances. As previously covered by InfoBytes, the FTC filed complaints against two groups of defendants involved in the debt-relief operation claiming the defendants, among other things, charged consumers advance fees and enrolled consumers in a high-interest financing program without making required disclosures. These actions, the FTC, contended, violated the FTC Act, TILA, and the Telemarketing Sales Rule (TSR), and stipulated orders were entered against several of the defendants in 2019. The terms of the stipulated final orders reached with the remaining defendants (see here and here) prohibit the defendants from (i) engaging in transactions involving secured or unsecured debt relief products and services; (ii) making misrepresentations and unsubstantiated claims regarding any products and services; (iii) violating the TSR; and (iv) collecting any further payments from consumers who purchased debt-relief services prior to the entry of the order. Additionally, certain defendants are required to pay a more than $24.5 million monetary judgment, which will be partially suspended due to inability to pay. One of the defendants is also required to pay $11,500, which will go towards consumer redress.

    Federal Issues Courts FTC Enforcement Settlement UDAP FTC Act TILA Telemarketing Sales Rule Student Lending

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  • CFPB obtains new judgments against debt-relief defendants

    Federal Issues

    On May 11, the U.S. District Court for the Central District of California obtained two additional judgments in an action by the CFPB against a mortgage lender and several related individuals and companies (collectively, “defendants”) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR), and Fair Credit Reporting Act (FCRA). These are the latest judgments reached with defendants in the ongoing litigation. (See InfoBytes coverage on previously announced settlements here, here, here, and here.)

    As previously covered by InfoBytes, the Bureau filed a complaint in January 2020 claiming the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products, but instead, the defendants allegedly resold or provided the reports to companies engaged in marketing student loan debt-relief services. The defendants also allegedly violated the TSR by charging and collecting advance fees for their debt-relief services. The CFPB further claimed 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 represented that consolidation could lower student-loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education. 

    The May 11 stipulated final judgment entered against a group of corporate defendants, as well as an associated individual, requires the defendants to pay more than $18 million in consumer redress. Payment will be suspended, however, upon satisfaction of certain outlined obligations. The defendants, who neither admitted nor denied the allegations, are also obligated to pay a $125,000 civil money penalty to the Bureau, and are permanently enjoined from offering or providing debt-relief services or from using or obtaining consumer reports for any purpose. Additionally, the individual defendant is banned from using or obtaining benefit from consumer information contained in prescreened consumer reports.

    On the same day, a second stipulated final judgment was entered against one of the individual defendants. The judgment requires the individual defendant to pay more than $3.4 million in redress to affected consumers, which will be partially suspended upon satisfaction of certain outlined obligations, along with a $1 civil money penalty. The individual defendant, who also neither admitted nor denied the allegations, is permanently enjoined from offering or providing debt relief services, from participating or engaging in the telemarketing of any consumer financial product or service, or from using or obtaining prescreened consumer reports for any purpose.

    Federal Issues Courts CFPB Consumer Finance CFPA Telemarketing Sales Rule FCRA Enforcement Settlement

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  • CFPB enters $34.1 million in judgments against debt-relief companies

    Federal Issues

    On May 7, the U.S. District Court for the Central District of California entered two default judgments totaling more than $34.1 million in an action by the CFPB against a mortgage lender and several related individuals and companies (collectively, “defendants”) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR), and Fair Credit Reporting Act (FCRA). Settlements have already been reached with the chief operating officer/part-owner of one of the defendant companies, as well as certain other defendants (covered by InfoBytes here, here, and here).

    As previously covered by InfoBytes, the Bureau filed a complaint in 2020 claiming the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products, but instead, the defendants allegedly resold or provided the reports to companies engaged in marketing student loan debt-relief services. The defendants also allegedly violated the TSR by charging and collecting advance fees for their debt-relief services. The CFPB further claimed 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 represented that consolidation could lower student-loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education. 

    The May 7 default judgment entered against the student loan debt-relief companies requires the collective payment of more than $19.6 million in consumer redress and more than $11.3 million in civil money penalties to the Bureau. The companies are also permanently enjoined from offering or providing debt-relief services or from using or obtaining consumer reports for any purpose. Moreover, the companies and any associated individuals may not disclose, use, or benefit from consumer information contained in or derived from prescreened consumer reports for use in marketing debt-relief services.

    A second default judgment was entered the same day against one of the individual defendants. The judgment requires the individual defendant to pay a more than $3.2 million civil money penalty and permanently enjoins him from providing debt relief services or from using or obtaining prescreened consumer reports for any purpose.

    Federal Issues Courts CFPB Consumer Finance CFPA Telemarketing Sales Rule FCRA Enforcement

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  • CFPB settles with additional debt-relief defendants

    Federal Issues

    On May 4, two additional settlements were reached with defendants in an action by the CFPB against a mortgage lender and several related individuals and companies (collectively, “defendants”) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR), and Fair Credit Reporting Act (FCRA). As previously covered by InfoBytes, the CFPB filed a complaint in 2020 in the U.S. District Court for the Central District of California claiming the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products, but instead, the defendants allegedly resold or provided the reports to companies engaged in marketing student loan debt relief services. The defendants also allegedly violated the TSR by charging and collecting advance fees for their debt relief services. The CFPB further alleged 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 represented that consolidation could lower student loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education. Settlements have already been reached with certain defendants (covered by InfoBytes here and here).

    The May 4 settlement reached with one of the defendant companies requires the payment of a $1 civil money penalty to the Bureau because of the defendant’s limited ability to pay. The defendant, who neither admits nor denies the allegations, is ordered to promptly take dissolution steps and is banned from offering or providing consumer financial products or services. The defendant is also prohibited from using or obtaining consumer reports for any purpose and must comply with reporting requirements.

    A second settlement was reached the same day with one of the individual defendants. Under the terms of the settlement, the defendant also is required to pay a $1 civil money penalty, as well as $3,000 out of $7 million in consumer redress, of which full payment is suspended provided other obligations are fulfilled. The defendant, who neither admits nor denies the allegations, is permanently banned from providing debt relief services or telemarketing consumer financial products or services. The defendant is also prohibited from using or obtaining “prescreened consumer reports” for any purpose, and is further required to, among other things, comply with reporting requirements and fully cooperate with any other investigations.

    Federal Issues Courts CFPA Telemarketing Sales Rule FCRA Consumer Finance CFPB

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