On January 10, the CFPB and the attorneys generals of Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin sued a New York-based debt relief company and its founders in the U.S. District Court for the Western District of New York for violating the Telemarketing Sales Rule as well as New York and Wisconsin state law.
The Bureau alleged that the company ran an unlawful scheme involving dozens of shell companies and third parties to deceive consumers into believing they may qualify for loans to help pay down debts. Though company employees tell most, if not all, consumers that they do not qualify for the advertised loans, they still encourage consumers to enroll in its debt-relief services with the promise that its network of law firms will negotiate lower debt amounts. The Bureau alleged that the company provides little, if any, debt-relief services but charged an illegal advance fee before any consumer debts were settled.
Putting it into Practice: As evidenced by the recent flurry of enforcement action, the CFPB and the FTC seem committed to cracking down on debt relief and credit repair enterprises (previously discussed here, here, here, and here.). The Bureau’s action also highlights its close working relationship with state attorneys general. Closer coordination with, and empowering state actors, has been a top priority for the Chopra administration. In a 2021 speech before the National Association of Attorneys General, Director Chopra stated the Bureau is committed to “clarifying the wide variety of claims that states can bring under [the Consumer Financial Protection Act]” and wants to “make clear that state AGs and regulators can enforce a range of federal prohibitions” and should join forces.