CFPB settles enforcement action against another debt settlement payment processor

by Ballard Spahr LLP

The latest chapter in the CFPB’s “comprehensive effort to address consumer harm and to root out unlawful practices across the debt settlement industry” is a settlement announced yesterday with Global Client Solutions, “a leading debt-settlement payment processor,” its CEO, and the chairman of its parent company’s board of directors. In its complaint filed in a California federal court concurrently with the proposed stipulated final judgment and consent order, the CFPB alleged that the defendants had violated the Telemarketing Sales Rule (TSR) by assisting and facilitating the charging of unlawful advance fees by debt-relief companies (DRCs) and that such unlawful conduct also violated the Consumer Financial Protection Act. The consent order requires the defendants to pay over $6 million in relief to consumers as well as a $1 million civil penalty.

According to the CFPB’s complaint, since October 2010, Global processed tens of millions of dollars in allegedly illegal advance fees from tens of thousands of consumers on behalf of hundreds of DRCs across the country. The CFPB alleged that after a consumer enrolled in a debt relief program, the DRC would instruct the consumer to stop making payments to creditors and instead make payments to Global for deposit in a custodial account. The CFPB claimed that at the time Global transmitted advance fees to DRCs, it knew that it had not yet transmitted any funds from consumers’ custodial accounts to creditors. The CFPB also claimed that Global had received hundreds of complaints from or on behalf of consumers.

In addition to requiring payment of consumer redress and a civil penalty, the consent order prohibits the defendants from continuing to engage in the unlawful conduct alleged in the complaint and requires them to engage in “reasonable screening” of current and prospective DRC clients. The consent order specifies certain information that the defendants must collect from current and prospective DRCs as part of “reasonable screening,” including additional information that must be collected from any DRCs claiming not to be subject to the TSR. It also requires the defendants to take reasonable steps to assess the accuracy of such information and specifies what those steps must include.

The consent order provides that the defendants must continue to monitor DRC clients and establishes various steps they must take as part of “monitoring.” Those steps consist of: (1) semi-annual audits of each DRC’s compliance with the TSR and the Dodd-Frank UDAAP prohibition, (2) reviewing and investigating complaints received about a DRC, (3) calculating on a monthly basis for each DRC the unauthorized return rate for ACH debit transactions, and (4) conducting “a reasonable investigation” for any DRC whose unauthorized return rate exceeds 0.5% or as to which Global has received an amount of complaints that exceeds certain thresholds. (The settlement’s 0.5% unauthorized return rate threshold matches the lower threshold for such returns proposed by NACHA in November 2013.)

During an investigation, Global must suspend all payments to the DRC until the DRC has implemented any required remediation and Global has updated and verified the information it collected from the DRC as part of “reasonable screening.” Global also agrees in the consent order to retain a third party monitor to conduct a review of Global’s business and develop a plan to address any deficiencies identified by the monitor and implement the monitor’s recommendations. The consent order also includes Global’s agreement to be subject to the CFPB’s supervisory authority for 3 years.

The vast majority of the CFPB’s settlements have been in the context of an administrative proceeding and did not involve the filing of a complaint by the CFPB in a federal court. The CFPB’s filing of a complaint against Global concurrently with the consent order likely reflects the CFPB’s desire for the Global defendants to be subject to the more severe consequences that attach to violating a court order than an administrative consent order. Should the Global defendants violate the injunction entered by the court, the CFPB could move to have them held in contempt of court.

Last year, the CFPB took a similar approach of filing a federal court complaint concurrently with a consent order in connection with its settlement with Meracord, another “leading payment processor” for DRCs. Like Global, the CFPB alleged that Meracord had violated the TSR by assisting and facilitating the charging of unlawful advance fees by DRCs.  However, in its announcement of the Meracord settlement, the CFPB explained that its decision to target a payment processor was based on the processor’s position as a “centralized chokepoint” for unlawful DRCs. Perhaps the CFPB’s decision not to use similar language in announcing the Global settlement reflects the strong criticism that lawmakers and industry have recently directed at “Operation Choke Point,” the coordinated federal multiagency enforcement initiative targeting banks serving online payday lenders and other companies that have raised regulatory concerns.

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.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.