The Consumer Financial Protection Act of 2010 and the Telemarketing and Consumer Fraud and Abuse Prevention Act regulate certain actions of debt relief service providers, such as requesting or receiving fees from consumers prior to the service provider successfully renegotiating at least one of the consumer’s debts and the consumer having made at least one payment under the renegotiated plan. The foregoing issues have been the subject of recent sweeps by the CFPB and the issuance of a number of Civil Investigative Demands.
On August 25, 2014, the CFPB filed a Complaint against Global Client Solutions, LLC (“GCS”) in the United States District Court for the Central District of California, alleging that it violated the TSR and the CFPA by providing “substantial assistance” to its debt relief service clients by processing the illegal fee payments. Specifically, the Complaint alleges that GCS “knew or consciously avoided knowing” that its clients were charging illegal fees and thereby violated the prohibition on “assisting and facilitating others'” violations.
Debt settlement companies that collect illegal fees from consumers are in the crosshairs. If you are a payment processor or debt relief service provider interested in preemptively mitigating potential liability, or if you have received a CID from the CFPB, contact a CID defense lawyer with experience resolving complex regulatory investigations and enforcement actions.
A Proposed Stipulated Final Judgment and Consent Order has been submitted to the court in the GCS matter.
Pending approval, it requires that GCS: (i) stop processing fees for entities that GCS “know[s] or consciously avoid[s] knowing” are “requesting or receiving unlawful” fees; (ii) perform a “reasonable screening” of all of its clients that provide debt relief services to determine if the clients are complying with applicable law; (iii) “continue to monitor each . . . client pursuant to the reasonable screening requirements” including semi-annual audits of those clients; (iv) pay the CFPB $6,099,000 in restitution; and (v) pay the CFPB an additional $1,000,000 as a civil penalty.
These extreme provisions clearly illustrate that concepts such as “willful blindness,” “assisting and facilitating” and “substantial assistance” liability are alive and well at the Bureau.
Information conveyed in this article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.
