An online debt-settlement company settled CFPB allegations that the company "steered" consumers toward high-cost loans offered by affiliated lenders and failed to disclose affiliations with creditors.
In a Complaint filed in the U.S. District Court for the Central District of California, the CFPB alleged that the company told consumers it was not "owned or operated" by any of the consumers' creditors when, in fact, the company was affiliated with two of the creditors: one through ownership, and the other through loans and agreements. The CFPB also alleged that the company:
- prioritized the settlement of debts owed to affiliated creditors over debts owed to unaffiliated creditors;
- obscured the cost of the debt-settlement program during the sign-up process; and
- had consumers sign pre-authorization forms in their enrollment paperwork that the company used to settle accounts without separate approval.
As a result, the CFPB alleged that the company violated 12 U.S.C. 5531 ("Prohibiting unfair, deceptive, or abusive acts or practices") and 5536 ("Prohibited acts") of the Consumer Financial Protection Act of 2010, as well as the Telemarketing Sales Rule.
As set forth in the Proposed Order, to settle the charges, the company has agreed to (i) stop settling debts for creditors with which it shares direct or indirect ownership, (ii) return at least $646,000 in fees to provide relief to consumers and (iii) pay a $750,000 civil money penalty.
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