A CFPB Christmas carol: first coordinated action with states

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In the first action of its kind since the agency’s creation, the CFPB, Attorneys General from New Mexico, North Carolina, North Dakota, and Wisconsin, and the Hawaii Office of Consumer Protection joined forces to enjoin a debt relief service provider from conducting business in violation of federal laws and the laws of the five participating states. These agencies brought suit in U.S. District Court against a Miami-based firm, and, as part of a global settlement, the court entered an order on December 21 permanently enjoining further violations of the FTC’s Telemarketing Sales Rule, Title X of the Dodd-Frank Act, and applicable consumer protection laws of the five states.

The defendants, Payday Loan Debt Solution, Inc. (PLDS), and its principal, Sanjeet Parvani, were found by the court to have advertised widely over the internet, received telephone calls in response to those internet marketing efforts, and collected substantial monies from consumers purportedly to help them settle their payday-loan debts. A joint investigation by the Bureau and the States found evidence that PLDS routinely charged consumers a fee in advance of actually settling their debts.

The court ordered PLDS to make restitution in the amount of $100,000 to consumers who were charged advance fees but received no services. The court also ordered PLDS to pay a civil money penalty to the Bureau, makes PLDS subject to CFPB supervisory authority for a period of two years, and imposes compliance reporting requirements during that period. Because PLDS cooperated with the investigation and voluntarily agreed to resolution of the matter, the civil money penalty was a modest $5,000.

The significance of this matter lies not in its particular facts and circumstances but in two other aspects. First, this proceeding appears to be a harbinger of further CFPB actions against participants in the debt-relief industry. In its press release, the CFPB describes the Florida action as part of its “comprehensive effort to prevent consumer harm in the debt-relief industry,” and warned that it “is focusing not only on debt-relief service providers, but also on their partners.”

Second, the CFPB’s publicizing of the settlement as the fruit of the long-anticipated (but heretofore unrealized) cooperation between the Bureau and State Attorneys General, presages further coordinated action. The Bureau’s press release quotes Director Cordray as saying, “We are pleased to be working with our state partners on this important effort to protect consumers.” In recent months, the CFPB has also taken aim at the mortgage modification industry, filing two actions in federal district court in California to shut down alleged mortgage modification scams.