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CFPB Sues Debt Relief Firms for Charging Illegal Fees

Thu 02 Feb, 2017  /  by McIntyre & Lemon  /   Client Alerts

02/02/17 – The Consumer Financial Protection Bureau (CFPB) has sued several law firms and attorneys for allegedly collaborating to charge illegal fees to consumers seeking debt relief.

The Telemarketing Sales Rule generally prohibits debt relief providers from charging a fee until they have actually settled, reduced, or changed the terms of at least one of the consumer’s debts. It also limits the types of fees a debt relief provider can charge for already settled debts. Under this rule, consumers facing financial difficulties should not pay any fees for debt relief until they receive the services they signed up for.

In a complaint filed in federal court, the CFPB alleges that the defendants violated the Telemarketing Sales Rule by collecting illegal fees and deceiving consumers about being charged upfront fees. Consumers seeking debt relief help from the attorneys in this case were given two contracts, one for debt settlement services and the other for bankruptcy-related services.

The CFPB alleges that consumers who signed up sought services only for debt relief and not bankruptcy. The contract given to consumers related to bankruptcy was a ruse to disguise illegal upfront fees. The CFPB alleges that the attorneys collected tens of millions of dollars in unlawful fees from consumers and often failed to settle any debts.

The CFPB seeks to stop the defendants’ scheme, obtain relief for harmed consumers, and impose penalties.

CFPB Press Release, Complaint.