CFPB Settles with Payment Processors and Owners

The CFPB recently entered a consent order against two payment processors and their owners—in their individual capacities—resolving an administrative enforcement proceeding based on alleged violations of the Consumer Financial Protection Act and Telemarketing Sales Rule.  The payment processors provided account maintenance and payment-processing services to consumers across the U.S. who were enrolled in debt relief programs.  The consent order requires the payment processors and individual owners to refund $8.7 million in fees to consumers and pay a $3 million civil monetary penalty.  Additionally, the individual owners and one of the payment processor entities are permanently barred from the debt-relief payment processing and account maintenance industries.

The CFPB made several specific findings of violations in the consent order:

• the payment processors designed and implemented policies and procedures that allowed student loan debt-relief service providers to take advance fees in violation of the TSR;
• the payment processors were affiliated with debt-relief service providers that required consumers to place funds for fees for debt-relief services in accounts managed by the payment processors in violation of the TSR;
• the payment processors paid commissions to third-party marketing companies for consumer business referrals in violation of the TSR;
• the payment processors engaged in deceptive acts or practices by falsely representing that they were independent of the debt-relief service providers in violation of the CFPA; and
• the payment processors engaged in deceptive acts or practices in violation of the CFPA when they did not fulfill their promises to consumers to hold payment of fees to debt-relief service providers until confirming (1) the consumers were in compliance with their debt consolidation agreements and (2) the debt-relief service provider had earned the fee.