On October 21, 2019, the Consumer Financial Protection Bureau (CFPB) announced that, together with the Attorneys General (AGs) of Minnesota, North Carolina, and California, it had filed a complaint and sought a temporary restraining order in the U.S. District Court for the Central District of California against a group of debt relief companies. The CFPB and AGs asserted that the defendants violated the Consumer Financial Protection Act and Telemarketing Sales Rule, as well as state consumer protection statutes.
Specifically, the complaint alleges that, since at least 2015, the defendants operated a debt-relief enterprise that deceived thousands of student loan borrowers and collected over $71 million in illegal advance fees. The defendants claimed to help borrowers obtain loan forgiveness or lower monthly payments through programs offered by the federal Department of Education. According to the CFPB, the defendants misrepresented that borrowers would achieve loan forgiveness in a matter of months — when loan forgiveness in fact takes 10 years and is determined by the Department of Education. Defendants also represented that borrowers were approved for lower payments, when they had not yet actually been approved or when the new payment was approved based on false information. Finally, the CFPB alleges that defendants informed borrowers that their lower payments were permanent when they were in fact subject to change based on changes in the borrower’s financial and other circumstances.
The complaint also alleges that the defendants failed to inform borrowers that payments made to the defendants would go toward paying down their student loan balances; that it was defendants’ routine practice to request that borrowers’ loans be placed into forbearance; and that it was defendants’ routine practice to submit false information on loan adjustment applications. Defendants also charged consumers an initial fee (typically between $900-$1,300) before consumers’ loans were placed in forbearance, in violation of the Telemarketing Sales Rule.
The CFPB and AGs requested a temporary and preliminary injunction, an order freezing assets, immediate access to defendants’ business premises, and an appointment of a Receiver; a permanent injunction; damages; restitution; civil money penalties; and costs.
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