CFPB Completes Draft Settlement of Legal Action Against Debt Settlement Company Alleging Abusive Behavior in Violation of CFPA | Ballard Spahr srl

The CFPB announced earlier this week that it has reached a settlement proposal for its lawsuit filed in California federal district court against SettleIt, Inc., a debt settlement company, alleging the company is was engaged in abusive acts or practices in violation of the Consumer Financial Protection Act and also violated the Telemarketing Selling Rule. The proposed command requires SettleIt to pay a consumer remedy of at least approximately $ 646,000 and a civil fine of $ 750,000.

In his complaint, the CFPB alleged that SettleIt is affiliated with CashCall and LoanMe, creditors with whom it purports to settle debts on behalf of consumers. According to the complaint, SettleIt and CashCall are owned and controlled by the same person and LoanMe has a financial relationship with that person.

The CFPB asserted that SettleIt engaged in abusive acts or practices in violation of the CFPA by deriving “an unreasonable advantage from the reasonable confidence of consumers that SettleIt would protect their interests in negotiating their debts by committing in a form of self-operation that has benefited SettleIt, CashCall, and LoanMe at the expense of consumers. In support of this claim, the CFPB also alleged:

• Consumers did not know SettleIt had financial ties to CashCall and LoanMe and SettleIt did not notify consumers of these financial ties.
• SettleIt told consumers it would only work in their best interests, and consumers reasonably trusted SettleIt to protect their interests when negotiating their debts.
• SettleIt prioritized the settlement of debts to CashCall and LoanMe over debts to unaffiliated creditors
• Settling debts with CashCall and LoanMe allowed SettleIt to collect its fees for these settlements
• SettleIt marketed new loans (called “Fresh Start Loans”) from CashCall and LoanMe to consumers and used the proceeds from the Fresh Start loans to pay SettleIt fees.

The CFPB further alleged that SettleIt violated the TSR by failing to clearly disclose the amount of its fees and collect its fees based on the consumers’ prior authorization of the settlements and that the alleged violations of SettleIt’s TSR also constitute violations of the CFPA.

The consumer’s recourse of at least $ 646,769.43 that SettleIt is required to pay under the proposed order represents the amount of the charge collected by SettleIt for the settlement of debts owed to CashCall and LoanMe. The ordinance also prohibits SettleIt from settling debts owed to CashCall, LoanMe, or any business with which it shares direct or indirect ownership and requires SettleIt, for all Fresh Start loans, to disclose its affiliation with lenders to consumers.