Alert September 03, 2013

CFPB Files Complaint Alleging Violation of Telemarketing Sales Rule

The CFPB filed a complaint in the United States District Court for the Central District of California against a debt-relief service company alleged to have violated the FTC’s Telemarketing Sales Rule and engaged in deceptive and unfair practices in violation of the Dodd-Frank Act. The TSR generally prohibits deception in telemarketing and prohibits debt-relief companies from charging advance fees. According to the CFPB, in violation of the TSR, the debt-relief company collected upfront fees for debt relief services, gave false statements about the fees and misled consumers. In particular, the CFPB alleged that the debt-relief service company misled consumers by claiming that customers would not pay any upfront fees, when in fact consumers paid thousands of dollars in upfront fees. The CFPB also alleged that the company claimed that consumers would be “debt free” within months of enrolling in the program, when in fact, “in numerous instances, consumers do not become debt free in months.” The CFPB is seeking to permanently enjoin the company from continuing its operations (e.g., marketing, promoting, or selling any debt-relief product or service) and is asking the court to award restitution and civil money penalties and order disgorgement or compensation for unjust enrichment.