CFPB and Georgia AG Settle With Debt-Relief Company

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP

On June 29, the CFPB and the Georgia Attorney General’s Office settled with a debt-relief and credit-repair company and its owners for allegedly deceiving consumers into hiring the company to lower or eliminate credit-card debts and improve consumers’ credit scores.  The complaint alleges that the plaintiffs’ use of telemarketing and direct mail violated the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, the Consumer Financial Protection Act, and Georgia’s Fair Business Practices Act by, among other things, falsely claiming that:

  • The debt relief program would reduce the amount of debt owed by the consumer as well as the amount of monthly payments for unsecured debt, and even eliminate debts completely;
  • The company knew the amount of debt owed by the consumer or whether it could achieve the stated amount of debt savings; and
  • The company could “restore” and ostensibly improve consumers’ credit scores and remove negative items from their credit reports.

The proposed order would:

  • Permanently ban the company and its owners and executives from telemarketing any consumer financial product or service and from offering, marketing, selling, or providing any financial-advisory, debt-relief, or credit-repair service;
  • Require the company and its owners and executives to pay a total civil money penalty of $150,001, of which $15,000 will be remitted to the State of Georgia; and
  • Impose a judgment for redress of at least $30 million to be suspended upon payment of the $150,001 civil money penalty.

Putting It Into Practice:  This enforcement action serves as a reminder for participants in the debt-relief and credit-repair space to monitor their compliance with state and federal telemarketing and other unfair and deceptive practices laws to ensure full and appropriate disclosure of relevant information before signing consumers up for services.  As a general matter, such companies should carefully consider their operations, policies, and procedures relative to advertising and marketing, including websites, inbound telephone scripts, print, radio, television and Internet, lead generation relationships, and third-party vendor relationships.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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