Consumer Finance Insights
August 31, 2021

Debt Settlement Company Enters into $1 Million Consent Judgment with Massachusetts AG

On August 31, 2021, the Massachusetts Attorney General’s Office (Massachusetts AG) announced that it reached a settlement with a Massachusetts-based debt settlement company to resolve allegations that the company violated the Massachusetts Consumer Protection Act.  The settlement resolves a lawsuit originally filed by the Massachusetts AG in 2018.  In the complaint, the Massachusetts AG alleged that the company enrolled consumers in a program that the company knew would be unlikely to benefit the consumer.  The company also allegedly engaged in the unauthorized practice of providing legal advice to consumers being sued by creditors.

The consent judgment will enjoin the debt settlement company from making unsubstantiated claims about the company’s ability to settle debts; from enrolling consumers in the program unless the company reasonably believes they will be able to complete it; from telling consumers to stop communicating or making payments to creditors; and from advising or negotiating on behalf of consumers sued for nonpayment of debts.  The consent judgment will also require the company to make clear disclosures on their website and other published materials to consumers about program outcomes, such as how many consumers complete the program and about any adverse effects from participating in the program, such as if the consumer’s credit will likely suffer.   The order further requires the company to pay $1 million to the Commonwealth and to provide annual reports on compliance.

According to the Massachusetts AG, this settlement is the first-of-its-kind in Massachusetts and is meant to lay the groundwork for future enforcement actions: “its terms will lay out a roadmap for addressing misconduct in this industry going forward.”

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