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  • Court enters $41 million default judgment against student debt-relief operators

    Courts

    On December 3, the U.S. District Court of the Central District of California entered a default judgment against a student debt-relief company and one of its owners (collectively, “defaulting defendants”) in an action brought by the CFPB alleging the defaulting defendants (and others not subject to the judgment) charged thousands of customers approximately $11.8 million in upfront fees in violation of the Telemarketing Sales Rule (TSR). As previously covered by InfoBytes, in July, the CFPB filed a complaint against the defaulting defendants, one other company, its owner, and four attorneys, alleging the companies would market its debt-relief services to customers over the phone, encouraging those with private loans to sign up with an attorney to reduce or eliminate their student debt. The businesses allegedly charged the fees before the customer had made at least one payment on the altered debts, in violation of the TSR’s prohibition on requesting or receiving advance fees for debt-relief service or, for certain defendants, the TSR’s prohibition on providing substantial assistance to someone charging the illegal fees. In August, the court approved stipulated final judgments with the other company owner (available here) and three of the attorneys (available here, here, and here).

    The court entered into a default judgment against the defendants after they failed to file an answer or otherwise respond to the Bureau’s complaint. The judgment requires the defaulting defendants to pay over $11 million in consumer redress with separate $15 million civil money penalties entered against the company and the owner. Additionally, the defaulting defendants are permanently banned from providing debt-relief services or engaging in telemarketing of any consumer financial product or service.

    Courts CFPB Enforcement Telemarketing Sales Rule Civil Money Penalties Student Lending Debt Relief

  • Satellite company to pay over $200 million for telemarketing violations

    Federal Issues

    On December 7, the DOJ announced a settlement with a satellite service provider totaling over $210 million in penalties to be paid to the United States and four states for alleged violations of the TCPA, the FTC Act, and similar state laws. The settlement stems from an action brought by the United States against the satellite company in 2009 asserting that the company initiated millions of unlawful telemarketing calls to consumers and was responsible for millions of calls made by marketers of the company’s products and services. In 2017, a district court awarded the U.S. and the states of California, Illinois, North Carolina, and Ohio $280 million in civil penalties, with a record $168 million going to the federal government (covered by InfoBytes here). On appeal, the U.S. Court of Appeals for the Seventh Circuit affirmed liability but vacated and remanded the monetary award for recalculation.

    The stipulated judgment requires the satellite company to pay over $200 million in civil penalties, with $126 million going to the U.S. government, nearly $40 million to California, over $6.5 million to Illinois, nearly $14 million to North Carolina, and $17 million to Ohio.

    Federal Issues DOJ TCPA Telemarketing Sales Rule FTC Act FTC State Issues Courts Appellate Seventh Circuit

  • CFPB charges debt-settlement company with TSR and CFPA violations

    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.

    Federal Issues CFPB Enforcement Telemarketing Sales Rule Courts CFPA

  • CFPB charges debt-relief company and owners

    Federal Issues

    On November 20, the CFPB announced it filed a complaint in the U.S. District Court for the Northern District of Illinois against a debt-relief company and its two owners (collectively, “defendants”) for allegedly violating the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act. According to the complaint, between 2011 and April 2019, the defendants allegedly misrepresented material aspects of their student loan debt-relief services, by, among other things, falsely representing that the services would reduce or eliminate payments, stop wage garnishment, lift tax liens, and improve credit scores. Additionally, the Bureau alleges the defendants violated the TSR by 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. Moreover, the defendants’ fees were allegedly not proportional to or a percentage of the amount saved as a result of their services. The complaint seeks injunctions against the defendants as well as damages, redress, disgorgement of ill-gotten gains, and the imposition of civil money penalties.

    Federal Issues CFPB Enforcement Courts Debt Relief Debt Settlement CFPA Telemarketing Sales Rule

  • FTC reaches $62 million settlement with student loan debt relief operation

    Federal Issues

    On November 19, the FTC entered into a settlement with defendants accused of engaging in deceptive practices when marketing and selling student loan debt relief services. As part of its enforcement initiative, Operation Game of Loans (covered by InfoBytes here), the FTC alleged that the defendants violated the FTC Act and Telemarketing Sales Rule (TSR) by, among other things, charging illegal up-front fees to enroll consumers in debt relief programs, accepting monthly payments that were not applied towards student loans, and collecting monthly fees that consumers believed were being applied to their loans but instead were going towards unrelated “financial education” programs (see previous InfoBytes coverage here). Under the terms of the order, the defendants are permanently banned from providing secured and unsecured debt relief products and services, and are prohibited from (i) engaging in unlawful telemarketing practices and violating the TSR; (ii) misrepresenting financial products and services; (iii) making unsubstantiated claims; and (iii) collecting, or assigning any right to collect, payments from consumers for products sold by the defendants. The defendants are also ordered to pay $62 million in monetary relief.

    Federal Issues FTC Debt Relief Enforcement Student Lending FTC Act Telemarketing Sales Rule UDAP Deceptive

  • CFPB takes action against debt-relief and debt-settlement companies

    Federal Issues

    On November 5, the CFPB announced an action filed in the U.S. District Court for the Central District of California against a student loan debt-relief company, a debt-settlement company, and the owner of both companies (collectively, “defendants”) for allegedly violating the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA) by charging illegal advance fees and using deceptive tactics to induce consumers to sign up for services. According to the complaint, from 2015 to the present, the defendants allegedly charged consumers upfront fees between $1,000 and $1,450 for the debt-relief company to file paperwork with the U.S. Department of Education to obtain loan consolidation, loan forgiveness, or income-driven repayment plans. According to the complaint, some consumers paid the upfront fee using a third-party financing company and paid an APR between 17 and 22 percent. Additionally, the CFPB alleges that the defendants required some consumers to pay the fee in installments into a trust plan, which carried a $6 monthly banking fee paid to the administrator of the trust accounts. The Bureau alleges that the defendants failed to provide the proper disclosures under the TSR. Moreover, the complaint asserts that from 2019 to the present, the defendants violated the CFPA by representing to consumers that they were turned down for a loan in order to pitch the company’s settlement services.

    The complaint seeks consumer redress, injunctive relief, and civil money penalties.

    Federal Issues Enforcement Debt Relief Debt Settlement CFPB Telemarketing Sales Rule

  • Supplement marketer again settles with FTC over negative option marketing

    Federal Issues

    On September 22, the FTC announced a $1.04 million settlement with a supplement marketer and its two officers (collectively, “defendants”), resolving allegations that the defendants engaged in deceptive sales and billing practices, in violation of the Restore Online Shoppers’ Confidence Act (ROSCA), the Telemarketing Sales Rule (TSR), and a previous court order. Previously, in 2016, the marketer entered into a settlement with the FTC covering allegations that the company engaged in negative option marketing by enrolling consumers in a membership program that billed up to $79.99 monthly unless the consumers canceled within an 18-day trial period. The 2016 settlement barred the company from, among other things, (i) obtaining consumers’ billing information without first disclosing they would be charged, that the charge would increase after a certain period, or that the charge would be reoccurring; (ii) obtaining payment from consumers without express written authorization; and (iii) failing to provide a simple way for consumers to cancel.

    According to the FTC’s new complaint, from 2016 to 2019, the defendants violated the previous consent order, ROSCA, and TSR by failing to clearly and conspicuously disclose that in order to cancel, consumers must contact the company “at least one day before the end of the advertised Free Trial Period to avoid being charged for the monthly membership program.” The agreed-upon proposed contempt order requires the defendants to pay nearly $1.04 million to be used for equitable relief, including consumer redress.

    Federal Issues FTC ROSCA Disclosures Negative Option Enforcement Telemarketing Sales Rule

  • FTC settles first consumer protection case against a VoIP service provider

    Federal Issues

    On September 22, the FTC and the Ohio attorney general announced several proposed stipulated final orders against a Voice over Internet Protocol (VoIP) service provider, along with an affiliated company, the VoIP service provider’s former CEO and president, and a number of other subsidiaries and individuals, to settle allegations concerning their facilitation of a credit card interest rate reduction scheme. This marks the FTC’s first consumer protection case against a VoIP service provider. According to the FTC and the AG, the VoIP service provider provided one of the defendants with the ability to place illegal robocalls in order to market “phony credit card interest rate reduction services.” Both of these defendants were controlled by the VoIP service provider’s former CEO who was also named in the lawsuit. In addition, the defendant that placed the illegal calls, along with four additional defendants, are accused of managing the overseas call centers and other components used in the credit card interest rate reduction scheme.

    One of the settlements will prohibit the former CEO, along with two corporations under his control, from (i) participating in any telemarketing in the U.S.; (ii) marketing any debt relief products or services; and (iii) making misrepresentations when selling or marketing any products or services. These defendants will collectively be subject to a $7.5 million judgment, which is mostly suspended due to their inability to pay.

    The settlement with the VoIP service provider and the affiliated company will require a payment of $1.95 million. The VoIP service provider and its U.S.-based subsidiaries will also be prohibited from hiring the former CEO or any of his immediate family members, as well as from hiring two of the other defendants. These defendants will also be required to follow client screening and monitoring provisions, and are prohibited from providing VoIP and related services to clients who pay with stored value cards or cryptocurrency, or to clients who do not maintain public-facing websites or a social media presence. Additionally, the defendants will be required to block calls that may appear to come from certain suspicious phone numbers, block calls that use spoofing technology, and terminate certain high-risk relationships.

    The settlements (see here, here, and here) reached with the defendant that placed the illegal calls and four additional defendants include prohibitions similar to those issued against the former CEO, and will require the payment of a total combined judgment of $10.3 million, which will be largely suspended due to their inability to pay.

    All settlements are subject to court approval.

    Federal Issues FTC Enforcement Telemarketing Sales Rule VoIP State Attorney General Credit Cards Interest Rate Consumer Finance

  • Court approves additional settlements in CFPB student debt relief action

    Courts

    On September 8, the U.S. District Court for the Central District of California entered a stipulated final judgment against two additional 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 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. Four defendants settled in August, with a total suspended judgment of over $95 million due to the defendants’ inability to pay and total payments of $90,000 to Minnesota, North Carolina, and California, and $1 each to the CFPB, in civil money penalties.

    The new final judgment holds the two relief defendants liable for nearly $7 million in redress; however, the judgment is suspended based on an inability to pay. The defendants are not subject to any civil money penalties, but are required to relinquish certain assets and submit to certain reporting requirements.

    Courts CFPB Student Lending State Attorney General CFPA Telemarketing Sales Rule UDAAP Debt Relief

  • FTC settles with student debt relief operation for $835,000

    Federal Issues

    On September 9, the FTC announced an $835,000 settlement with the operators of a student loan debt relief operation, resolving allegations against five individuals (collectively, “defendants”) whom the FTC claims engaged in deceptive marketing and charged illegal upfront fees. According to the November 2019 complaint, filed in the U.S. District Court for the Central District of California against the defendants and several others, the defendants allegedly used telemarketing calls, as well as media advertisements, to enroll consumers in student debt relief services in violation of the FTC Act and the Telemarketing Sales Rule. The defendants allegedly misrepresented that they were affiliated with the U.S. Department of Education and misrepresented “material aspects of their debt relief services,” including by promising to enroll consumers in repayment programs to reduce or eliminate payments and balances. Additionally, the defendants charged illegal upfront fees, and often placed the consumers’ loans into temporary forbearance or deferments with their student loan servicers, without the consumer’s authorization.

    The settlement order includes a monetary judgment of over $43 million, which is partially suspended due to the defendants’ inability to pay. The defendants “will be required to surrender at least $835,000 and additional assets, which will be used for consumer redress.” Additionally, the defendants are prohibited from providing student debt relief services in the future and they must cooperate in the FTC’s pursuit of the case against the remaining defendants.

    Federal Issues FTC Telemarketing Sales Rule FTC Act Deceptive UDAP Student Lending Debt Relief

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