In a case involving the first joint enforcement action between the CFPB and several state agencies, the United States District Court for the Southern District of Florida has entered an order requiring a nationwide debt-relief services company to refund up to $100,000 to consumers who were charged advance fees for debt settlement services. The complaint alleged that defendant instructed consumers to cease making payments to their pay-day loan creditors, and, instead, to authorize electronic fund transfers into a designated account controlled by defendant’s payment processor. Defendant told consumers that once the account balance reached a certain level, it would attempt to settle the consumer’s debt. However, prior to actually settling any debt, and in violation of FTC Rules, the Dodd-Frank Act, and various state consumer protection laws, defendant and its payment processor collected a variety of advance fees, such as processing fees.
In addition to the civil money penalty, the debt-relief company also agreed to the entry of an injunction barring further unlawful conduct and ongoing compliance monitoring. The relatively small civil money penalty likely reflects the debt-relief company’s cooperation with the CPFB following notice of the joint investigation. This action is part of a broader effort by the CFPB to address unlawful conduct in the consumer debt-relief industry.