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On May 1, the U.S. District Court for the Northern District of Illinois ordered the former owner of a now-defunct debt-relief company to pay over $43 million in restitution and penalties. The order resolves a lawsuit filed by the CFPB in 2020 alleging violations of the Consumer Financial Protection Act (CFPA) and the Telemarketing Sales Rule (TSR).
The CFPB alleged that the company engaged in deceptive conduct and unlawful billing practices in violation of both statutes. Specifically, the Bureau alleged that the company:
- Charged illegal advance fees. The company collected fees from consumers before performing any debt-relief services, in violation of the TSR.
- Deceived student loan borrowers. The company misrepresented its ability to secure loan forgiveness or reduced payments and to improve credit scores, constituting deceptive practices under the CFPA.
- Failed to provide required disclosures. The company did not clearly inform consumers of material terms, including the true cost, scope, and limitations of its services.
The company was dissolved before the lawsuit was filed and never appeared in the case and a default judgment was entered against it in 2022. On January 10, 2025, the court granted summary judgment against the company's former owner, finding him personally liable for the company's conduct. The May 1 order directs him to pay approximately $2.1 million in restitution based on net revenues, and a $41.1 million civil penalty.
Putting It Into Practice: Despite the continued uncertainty surrounding the CFPB's future role in consumer protection, UDAAP enforcement remains a priority for both federal and state agencies, particularly in matters affecting financially vulnerable consumers (previously discussed here and here). Financial institutions can expect UDAAP enforcement to continue regardless of the result of the ongoing litigation regarding the future of the CFPB (previously discussed here).
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