On July 13, the Consumer Financial Protection Bureau (CFPB) announced it had filed suit in the United States District Court for the Central District of California against a Texas student loan debt-relief business and a marketing and customer service company for engaging in a nationwide student-loan debt-relief operation that allegedly charged illegal upfront fees in violation of the Telemarketing Sales Rule (TSR), 16 C.F.R. Part 310. The CFPB also filed suit against the companies’ owners and four attorneys involved in the operation.
Under the TSR, a company cannot request or receive fees for debt-relief services sold through telemarketing until the company has renegotiated, settled, or reduced the terms of the debt. The complaint alleges the defendants charged monthly fees beginning around the time consumers signed up, before debts were settled, and collected approximately $11.8 million in fees from about 2,600 customers since 2015. The complaint seeks injunctive relief, civil money penalties, and disgorgement.
The CFPB reached proposed stipulated final judgments with four of the individual defendants, including three of the attorneys. If entered by the court, the judgments would require the individuals to provide monetary relief to the consumers, although the full judgment would be suspended based on the defendants’ showing of an inability to pay in full. The settlement would also require each defendant to pay a $1 civil money penalty.
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