CFPB Settles with Debt Relief/Settlement Companies, CEO

The CFPB recently settled an enforcement action in California against a student-loan debt relief company, a related debt-settlement company, and their owner/CEO.  In the enforcement action, the CFPB alleged that the defendants violated the Telemarketing Sales Rule by charging upfront fees for debt-relief services.  Additionally, the CFPB alleged that the CEO and the debt-settlement company engaged in deceptive acts and practices by misrepresenting to consumers that the debt-settlement company had considered making a loan to the consumer and denied the loan on the basis of the consumer’s poor credit; in reality, the debt-settlement company did not make any loans and used this ploy as a way to get consumers to sign up for its debt-settlement services.

As part of the settlement, the court entered a stipulated judgment permanently banning the debt relief company from any future debt-relief services, enjoining the debt-settlement company from obtaining referrals from any other companies purporting to make or arrange loans, and banning the CEO from debt-relief services for five years as well as imposing a $30k civil penalty against him.