Maryland Legal Alert for Financial Services

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CFPB Action Against Debt Settlement Provider

On November 8, 2017, the Consumer Financial Protection Bureau (CFPB) filed a complaint in United States District Court for the Northern District of California against a nationwide debt settlement plan (DSP) provider.  The complaint alleges that the DSP provider misled consumers about the willingness of creditors to negotiate with third party debt settlement companies.  The CFPB contended that the DSP provider knew that several large creditors would not deal directly with third party debt settlement companies and that the DSP provider failed to make this clear to its customers.  The CFPB also alleged that the DSP provider misled its customers about the extent of the services it would provide by allegedly promoting that the DSP provider’s negotiators would deal directly with creditors when in fact, the DSP provider offered coaching to its customers to assist them in negotiating certain settlements on their own.  The CFPB also criticized the DSP provider’s practice of charging fees not just for settlements negotiated directly by the DSP provider, but also for situations where creditors stopped collection efforts.  The CFPB’s complaint contends that the above conduct constituted deceptive acts/practices and abusive acts/practices under the Consumer Financial Protection Act of 2010.  The CFPB’s complaint also alleged violations of the Telemarketing Sales Rule in connection with the DSP provider’s alleged lack of disclosures concerning funds paid in and held on behalf of customers for anticipated settlements. The CFPB’s complaint seeks to enjoin the DSP provider’s conduct, consumer redress, disgorgement of ill-gotten gains, civil money penalties, and costs.  Please contact Christopher Rahl for more information concerning this topic.