Consumer Financial Protection Bureau Files Order to Stop Illegal Debt Settlement Practices

Consumer Financial Protection Bureau Files Order to Stop Illegal Debt Settlement Practices
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August 29, 2014

The Consumer Financial Protection Bureau (CFPB) has filed an order with a federal court to stop a payment processing company from collecting illegal fees from consumers.

CFPB filed the consent order in a federal district court against Global Client Solutions for allegedly helping other companies to collect tens of millions of dollars in illegal upfront fees. If approved by a judge, the company and its two owners would be required to stop all illegal activities, pay $6 million in consumer relief and pay a $1 million civil penalty.

Oklahoma-based Global Client Solutions is a payment processor for the debt-settlement industry. According to the CFPB's complaint, the company has been processing tens of millions of dollars in illegal advanced fees from customers since 2010.

Debt-settlement companies offer to help consumers by negotiating settlements with creditors. While the debts are being negotiated, consumers are instructed to stop paying their creditors and instead make monthly payments to a payment processor. The Telemarketing Sales Rule prohibits debt-settlement companies from charging consumers advance fees before settling any of their debts. As a result, many consumers who use these services end up paying unlawful advanced fees and may never settle their debt.

The CFPB complaint said that the company, and its owners Robert Merrick and Michael Hendrix, violated federal laws by making it possible for these debt-settlement companies to charge consumer illegal fees.

The defendants will be subject to monitoring by the CFPB and will be required to make reports to the CFPB to ensure their compliance. The defendants will also pay over $6 million in consumer relief in addition to paying a civil money penalty of $1 million.

The Bureau's complaint is not a finding or ruling that the defendants have actually violated the law. The proposed court order has been filed with the Court for the Central District of California and will have the full force of law only when signed by the presiding judge.