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On May 22, the New York attorney general (NYAG) announced a proposed settlement with three student loan debt relief companies and two of the companies’ executive officers (collectively, “defendants”), resolving allegations that the defendants participated in a broader scheme that fraudulently, deceptively, and illegally marketed, sold, and financed student debt relief services to consumers nationwide. As previously covered by InfoBytes, the September 2018 complaint alleged that a total of nine student loan debt relief companies, along with their financing company, and the two individuals violated several federal and state consumer protection statutes, including the Telemarketing Sales Rule, New York General Business Law, the state’s usury cap on interest rates, disclosure requirements under TILA, and the Federal Credit Repair Organization Act. Specifically, the NYAG asserted, among other things, that the defendants (i) sent direct mail solicitations to consumers that deceptively appeared to be from a governmental agency or an entity affiliated with a government agency; (ii) charged consumers over $1,000 for services that were available for free; (iii) requested upfront payments in violation of federal and state credit repair and debt relief laws; and (iv) charged usurious interest rates.
If approved by the court, the proposed consent judgment would require the five defendants to pay $250,000 of a $5.5 million total judgment, due to their inability to pay. Additionally, the defendants are also permanently banned from advertising, marketing, promoting, offering for sale, or selling any type of debt relief product or service—or from assisting others in doing the same. Additionally, the defendants must request that any credit reporting agency to which the defendants reported consumer information in connection with the student loan debt relief services remove the information from those consumers’ credit files. The defendants also agreed not to sell, transfer, or benefit from the personal information collected from borrowers.
The NYAG previously settled with two other defendants in February, covered by InfoBytes here.
On May 21, a credit repair trade association filed a complaint against the CFPB in the U.S. District Court for the Southern District of Florida alleging the Bureau violated the credit repair organizations’ First Amendment rights under the Constitution by enforcing a six-month payment waiting period in the FTC’s Telemarketing Sales Rule (TSR). The association is challenging Section 310.4(a)(2)(ii) of the TSR, which prohibits credit repair organizations from requesting or receiving payment for services rendered for a minimum of six months after the services have been performed. The complaint alleges that the prohibition (i) exceeds the FTC’s statutory authority under the Telemarketing and Consumer Fraud and Abuse Prevention Act; (ii) conflicts with the Credit Repair Organizations Acts (CROA); and (iii) is an infringement on the First Amendment rights of credit repair organizations by improperly impairing fully protected speech. Specifically, the association argues that the TSR is only applicable to credit repair organizations in certain situations, and the CROA—which does not require the six-month waiting period nor proof that “results were achieved”—is “the final and decisive law concerning credit repair organizations, including the time and manner of their billing practices.” Moreover, the complaint argues that the Bureau does not have the authority to enforce the TSR against credit repair organizations, as the Dodd-Frank Act did not explicitly transfer the authority from the FTC. The complaint is seeking a declaratory judgment that the TSR is unenforceable, invalid, and unlawful.
- Jonice Gray Tucker to join CFPB panel at CBA’s Washington Forum
- Jonice Gray Tucker to moderate “Pandemic relief response and lasting impacts on access, credit, banking, and equality” at the American Bar Association Business Law Section Spring Meeting
- Jeffrey P. Naimon to discuss "Post-pandemic CFPB exam preparation" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Making fair lending work for you" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Reading the tea leaves of President Biden’s initial financial appointees" at LendIt Fintech
- Moorari K. Shah to discuss “CA, NY, federal licensing and disclosure” at the Equipment Leasing & Finance Association Legal Forum
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference