InfoBytes Blog
CFPB obtains new judgments against debt-relief defendants
On May 11, the U.S. District Court for the Central District of California obtained two additional judgments in an action by the CFPB against a mortgage lender and several related individuals and companies (collectively, “defendants”) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR), and Fair Credit Reporting Act (FCRA). These are the latest judgments reached with defendants in the ongoing litigation. (See InfoBytes coverage on previously announced settlements here, here, here, and here.)
As previously covered by InfoBytes, the Bureau filed a complaint in January 2020 claiming the defendants violated the FCRA by, among other things, illegally obtaining consumer reports from a credit reporting agency for millions of consumers with student loans by representing that the reports would be used to “make firm offers of credit for mortgage loans” and to market mortgage products, but instead, the defendants allegedly resold or provided the reports to companies engaged in marketing student loan debt-relief services. The defendants also allegedly violated the TSR by charging and collecting advance fees for their debt-relief services. The CFPB further claimed that the defendants violated the TSR and CFPA when they used telemarketing sales calls and direct mail to encourage consumers to consolidate their loans, and falsely represented that consolidation could lower student-loan interest rates, improve borrowers’ credit scores, and change their servicer to the Department of Education.
The May 11 stipulated final judgment entered against a group of corporate defendants, as well as an associated individual, requires the defendants to pay more than $18 million in consumer redress. Payment will be suspended, however, upon satisfaction of certain outlined obligations. The defendants, who neither admitted nor denied the allegations, are also obligated to pay a $125,000 civil money penalty to the Bureau, and are permanently enjoined from offering or providing debt-relief services or from using or obtaining consumer reports for any purpose. Additionally, the individual defendant is banned from using or obtaining benefit from consumer information contained in prescreened consumer reports.
On the same day, a second stipulated final judgment was entered against one of the individual defendants. The judgment requires the individual defendant to pay more than $3.4 million in redress to affected consumers, which will be partially suspended upon satisfaction of certain outlined obligations, along with a $1 civil money penalty. The individual defendant, who also neither admitted nor denied the allegations, is permanently enjoined from offering or providing debt relief services, from participating or engaging in the telemarketing of any consumer financial product or service, or from using or obtaining prescreened consumer reports for any purpose.