United States: CFPB And DOJ Teaming Up In Enforcement And Other CFPB Updates

Last Updated: December 19 2014
Article by Allyson B. Baker, Joanna P. Breslow Boyd and Peter Frechette

Consumer Financial Protection Bureau (CFPB or Bureau) investigational fact finding – whether through a civil investigative demand (CID) or other means – might yield evidence for civil lawsuits brought by the Bureau and potential evidence for criminal matters prosecuted by the Department of Justice (DOJ). In addition to the monetary relief and civil money penalties the CFPB can impose, the Consumer Financial Protection Act (Title X of the Dodd-Frank Act) provides that if the CFPB "obtains evidence" of conduct that "may constitute a violation of Federal criminal law, the Bureau shall transmit such evidence" to the DOJ. Individuals or companies that receive a CID from the CFPB should take these requests seriously and approach them as if they are evidence-gathering mechanisms with far-reaching consequences. Recent enforcement actions demonstrate the extent to which the CFPB and DOJ are working together to investigate and prosecute alleged violations of consumer protection laws.

First CFPB Criminal Referral Results in Nine-Year Prison Sentence

On December 4, 2014, the CFPB announced a settlement with Premier Consulting Group LLC. In a May 2013 complaint the Bureau alleged that Premier and another debt-settlement firm, Mission Settlement Agency, violated the advance fee prohibition of the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310, which provides that it is abusive to request or receive payment for debt relief services before renegotiating, settling, reducing, or otherwise altering the terms of a consumer's debts. The Bureau alleged that consumers never received the services for which the advance fees were charged and that the companies did not provide actual services, which caused consumers to incur unnecessary debt that further harmed them.

The proposed consent order requires Premier to pay a civil money penalty of $69,075. The consent order enjoins Premier from taking advance fees or violating the TSR, and Premier may not disclose, use, or benefit from customer information. Among other things, Premier is also required to take additional steps, such as adhering to a compliance plan (including creating and maintaining written policies, training programs, and monitoring processes), and must cooperate with the CFPB on related investigations.

In May 2013, in a related case involving some of the same parties, the DOJ unsealed charges against Mission Settlement Agency and several of its executives. Several employees have pleaded guilty, and the former owner was sentenced to nine years in prison on November 29, 2014. According to the CFPB and DOJ, Mission Settlement Agency and its employees offered debt settlement services to customers across the country and charged significant fees while providing little or no actual services. The criminal charges against the Mission Settlement Agency executives marked the first criminal charges stemming from a CFPB referral. The prison sentence for the owner is the first prison sentence resulting from a CFPB criminal referral to the DOJ.

The CFPB accused the defendants of engaging in unfair and deceptive acts or practices and violating the TSR, and the DOJ charged the defendants with mail and wire fraud. The owner and company pleaded guilty in April 2014 and were sentenced on November 19, 2014 in the U.S. District Court for the Southern District of New York. Several other principals still await sentencing. In addition to the nine-year prison sentence, the owner must serve three years of supervised release, pay a fine of $15,000, and pay forfeiture and restitution of almost $2.2 million. The company was ordered to pay a fine of nearly $4.4 million. In a joint press conference regarding Mission Settlement Agency, U.S. Attorney for the Southern District of New York Preet Bharara described the CFPB and DOJ as a "potent partnership." CFPB Director Cordray echoed this sentiment in his statement, and noted that the partnership is "integral to [the CFPB's and DOJ's] success and mission."

This partnership is ongoing: On November 18, 2014, the DOJ unsealed a criminal complaint against a Georgia debt collection company, Williams Scott & Associates (WSA), and its principals, based on a CFPB referral. The DOJ accused WSA, its owner, and several employees of conspiring to commit wire fraud in a debt collection scheme. The conspiracy allegedly involved WSA employees calling consumers and representing that they possessed governmental authority and the ability to have arrest warrants issued in order to threaten and coerce consumers into paying making payments on debts.

A CFPB investigation may be a prelude to a criminal case. The CFPB and DOJ have pursued several cases together, and the trend is likely to continue.

Other CFPB Updates:

  1. Sham credit cards: On December 17, 2014, the CFPB filed a lawsuit against a Texas-based company, Union Workers Credit Services (UWCS), alleging that Union Workers Credit Services deceived consumers into paying fees to sign up for a sham credit card. The complaint states that UWCS sells a buying-club membership card that the company advertises as a general-purpose credit card. The CFPB also contends that UWCS's website falsely suggests that the company is affiliated with labor unions. In addition to false advertising claims, the CFPB alleges that Union Workers Credit Services used consumer credit reports to target certain consumers without their consent. The New York State Attorney General and the U.S. Postal Service have also filed lawsuits against Union Workers Credit Services: the Postal Service sued UWCS in 2005. The New York Attorney General's office sued UWCS in 2013.
  2. Medical debt report: On December 11, 2014, the CFPB released a report finding that medical debt has a significant impact on consumer credit and that 43 million people have overdue medical debt on their credit reports. The report highlights the complexities of the medical debt collection system, lack of transparency, and use of credit reports as a collection tool as key areas of the Bureau's focus. The report states, as part of the issue, that the medical debt collection and reporting system "introduces multiple points where error can creep into the system." Director Cordray announced that the CFPB will now require the largest credit reporting companies to provide the Bureau with regular, standardized accuracy reports as part of the Bureau's ongoing examinations of key areas for consumers. "A top priority for the CFPB is to hold all players in the credit reporting market accountable for ensuring the accuracy of data in credit reports."
  3. Student debt relief: On December 11, 2014, the CFPB and Florida's Attorney General filed a proposed consent decree against a student debt relief company, College Education Services, and separately filed a lawsuit against Student Loan Processing US for allegedly illegally marketing student debt relief services. The Bureau alleges that College Education Services charged illegal advance fees and made false statements regarding student loans, including misrepresenting offers for lower payments and relief from default or garnishment. The Bureau seeks to permanently ban College Education Services from lending to students, and also has imposed a $25,000 civil money penalty against the company and its owners. The complaint filed against Student Loan Processing US (also known as Irvine Web Works, Inc.) alleges that the company charged illegal advance fees, deceived borrowers about the costs and terms of its services, and falsely represented an affiliation with the U.S. Department of Education. In addition to injunctive relief, the Bureau is seeking restitution to consumers and a civil money penalty against the company and its owner.
  4. Credit Card agreements among college students: On December 15, 2014, the CFPB issued a report on college credit card agreements. The report finds the college credit card agreements are declining, and being replaced by debit and prepaid card agreements, which are now more common than credit card agreements. The report also finds that 80 percent of the institutions surveyed by the Bureau do not put their agreement information on their websites. The report highlights that the CFPB is closely monitoring the marketing arrangements that colleges and universities may have with financial institutions – especially those related to deposit accounts, prepaid cards, debit cards, and other financial products.

We wish you a safe and happy holiday season. Please click here to enjoy our firm's holiday card.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions