A debt settlement company owned by the founder of non-bank lender CashCall agreed to pay a fine of $ 750,000 in response to allegations that it steered consumers toward high-cost loans from affiliate lenders and failed to disclosed relationships with affiliate lenders.
SettleIt, an online company, also agreed to reimburse consumers for $ 646,000 in fees in a settlement proposed by the Consumer Financial Protection Bureau filed Tuesday in US District Court for the Central District of California.
The CFPB had alleged that SettleIt had abused thousands of consumers by pretending to be independent while negotiating to settle their debts with other lenders. The company marketed and refinanced consumers on loans from non-bank lenders CashCall and LoanMe without revealing that they were affiliates, the office said.
SettleIt owner J. Paul Reddam also owns Call for funds, and loaned money to another affiliate, LoanMe and its unit, Redo Lending, which is owned by former CashCall treasurer Jonathan Williams, according to the complaint.
“SettleIt’s strategy of getting consumers to make deals with its accomplices was illegal,” CFPB acting director David Uejio said in a press release Tuesday. “The CFPB will not tolerate companies that claim to represent consumers, but rather abuse their trust in a self-operating system. This case provides a clear example of what Congress intended to ban when it created the CFPB and gave it the power to prevent abusive practices.
SettleIt sold its debt settlement services to 17,500 clients between 2016 and 2019, operating from the same building in Orange, Calif., As CashCall, LoanMe and RedoLending, according to the CFPB complaint.
Steve Klopstock, president and CEO of SettleIt, did not immediately respond to a request for comment. Klopstock is also vice president of loans at CashCall, according to his LinkedIn profile.
The CFPB alleged that SettleIt treated consumers with debts to CashCall and LoanMe differently. The company reportedly marketed loans from CashCall and LoanMe and refinanced indebted consumers into new loans from both companies that included undisclosed fees. SettleIt also asked consumers to allow the company to settle their debts without a consumer’s express consent, the office said.
The agency alleged that SettleIt favored paying off debts to CashCall and LoanMe over other unaffiliated lenders, and its employees gave contact information to consumers who were behind in their payments to both companies.
The CFPB cited SettleIt for engaging in abusive behavior in violation of the Consumer Financial Protection Act and for failing to clearly disclose costs and charges in violation of the telemarketing rule.
The Dodd-Frank Act gave the CFPB the power to punish companies for violating a long-standing federal ban on “unfair”, “deceptive” or “abusive” acts or practices. Last month, the CFPB canceled the Trump administration’s advice on abusive practices, paving the way for more coercive measures this could include allegations of abuse.
