The CFPB filed a complaint and proposed order with the United States District Court for the Western District of Washington against a payment processor for the debt settlement industry alleged to have violated the Telemarketing Sales Rule. The TSR generally prohibits deception in telemarketing and prohibits debt-relief companies from charging advance fees. It is also a deceptive telemarketing act or practice under the TSR for a person to provide substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is violating the TSR. According to the CFPB, in violation of the TSR, the payment processor processed payments that enabled debt settlement companies to charge consumers upfront fees. The complaint further alleged that the payment processor knew that it was transmitting advance fees to debt settlement companies that had not yet settled consumers’ debts, helping debt settlement companies charge millions of dollars in unlawful fees to more than 11,000 consumers in multiple states. The CFPB is seeking to bar the payment processor from processing payments for debt settlement companies and for members of the related mortgage-settlement industry, subject the payment processor to monitoring by the CFPB, require compliance monitoring reports, and is asking the court to impose a civil money penalty of $1.36 million on the payment processor.
In announcing its action, the CFPB noted that the complaint and proposed order against the payment processor is part of a comprehensive effort to prevent consumer harm in the debt settlement industry. In particular, the CFPB noted that it has pursued several debt-settlement providers that charged consumers advance fees with this particular payment processor’s assistance and has filed a complaint against four other debt settlement companies. Both the CFPB and FTC have aggressively targeted debt settlement providers that charge consumers advance fees (see e.g., September 3, 2013 Alert).