CFPB Moves Forward With Debt Relief Suit Over $3.4M In Alleged Advance Fees

On June 10, the CFPB moved to reopen its 2021 enforcement action against the final remaining defendant in a student debt relief case involving over $3.4 million in alleged illegal advance fees. The Bureau, under Acting Director Russel Vought, told the U.S. District Court for the Central District of California it will proceed against the individual defendant following a four-month stay.

The CFPB previously settled with the other defendants in the case, including the company and its nominal owner, who agreed to dissolve the business and pay a $2,000 civil penalty based on an inability to pay. The current motion seeks to lift the administrative stay and proceed with summary judgement briefing against the final defendant.

In its complaint, the CFPB alleges that the defendant:

• Controlled operations of an unlawful debt-relief business. The Bureau claims the defendant ran all aspects of a student loan assistance company that charged illegal upfront fees to over 3,3000 consumers between 2015 and 2019.
• Violated the Telemarketing Sales Rule by requesting fees before delivering results. According to the CFPB, consumers were required to pay between $695–$795 upfront, plus $39 monthly fees, before any loan modification or consolidation had been completed.
• Transferred unlawful fees to a shell company for personal use. The CFPB alleges that more than $400,000 was funneled to a separate company and used for luxury goods, casino purchases, and nightclub visits.

Putting It Into Practice: While the CFPB has pulled back from enforcing certain actions and scaled back its overall enforcement activity, regulating debt relief practices remains a clear priority under the new administration (previously discussed here and here). Financial institutions should expect continued enforcement of debt relief practices during the new administrations tenure.