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Financial Services Law Insights and Observations

CFPB Takes Action Against Largest Debt Settlement Provider

Consumer Finance CFPB Debt Collection Enforcement Debt Settlement Telemarketing Sales Rule CFPA

Consumer Finance

On November 9, the CFPB announced the filing of a complaint against the largest debt settlement provider in the country and its co-CEO for allegedly deceiving consumers about its debt settlement services. According to the complaint, the defendants engaged in deceptive acts and practices in violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act by:

  • misleading consumers about the settlement provider’s ability to negotiate with creditors that the settlement provider knew maintained policies against working with settlement companies;
  • instructing consumers to mislead creditors when asked about their participation in a debt settlement program;
  • leading consumers to believe the defendants would negotiate on their behalf when, in fact, some consumers were only “coached” on how to negotiate settlements on their own;
  • misleading consumers by charging them the full fee when creditors stop collection efforts without the defendants taking any action despite advertising that the fee is only charged if settlement is negotiated by the settlement provider and payments begin under the terms of a settlement; and
  • failing to clearly and conspicuously disclose consumers’ rights to refunds from their deposit accounts if they leave the settlement program.

The CFPB is seeking monetary relief, civil money penalties, and injunctive relief against the defendants.

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