The CFPB announced that it has entered into a proposed settlement with a company and its three owner/officers for allegedly charging unlawful advance fees in violation of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA) in connection with their student loan debt relief business.
The complaint alleges that the company, Timemark Solutions, violated the TSR and CFPA by charging and collecting advance fees before consumers had received any adjustment of their student loans or made any payments toward such adjusted loans. Interestingly, the complaint does not allege that the company engaged in any other misleading conduct, such as misrepresenting its ability to obtain relief for consumers or its affiliation with the Department of Education, despite several consumer complaints to the CFPB to this effect.
The CFPB’s complaint alleges that Timemark marketed its debt relief services online and provided a telephone number for consumers to call to sign up for services. After a consumer signed Timemark’s service agreement, Timemark would submit the consumer’s application for loan consolidation, income-based repayment, or loan forgiveness to the U.S. Department of Education. This usually occurred the same day that the customer contracted with Timemark or within a week after. It would take at least a few weeks, and sometimes months, for the application to be processed and approved by the Department. However, Timemark received the consumer’s first payment for the service within a few days (or, at the latest, within 30 days) of the consumer’s signing Timemark’s service agreement. According to the complaint, “Timemark received this first payment, and sometimes the entire amount due, before the Department of Education would approve a consumer’s application for debt-relief, and before a consumer could make a first payment on newly altered debt,” in violation of the TSR.
Under the proposed settlement, full payment of the judgment (nearly $3.8 million in consumer redress) will be suspended if the company and two of the individual defendants pay certain nominal amounts within 10 days after the order is entered, due to the defendants’ limited ability to repay based on sworn financial statements. The proposed settlement also permanently bans the defendants from offering debt relief services and prohibits them from disclosing customer information and seeking to collect payments from any customer.