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CFPB Wins $21 Million Judgment Against Predatory Maryland Debt Relief Firms

Mislead red signage points left, inform signage points right

The Consumer Financial Protection Bureau (CFPB) recently won a default judgment against two Maryland debt relief firms for misleading consumers about their debt-relief programs.  Read on to learn about the case, and if you are worried about the debt you face, seek the help of a legitimate and knowledgeable Maryland bankruptcy attorney to answer your questions about bankruptcy or other debt relief options.

CFPB files lawsuit alleging debt collection firms are misleading consumers

According to the lawsuit filed by the CFPB, Federal Debt Assistance Association, LLC and Financial Document Assistance Administration, Inc. imply that they provide “financial advisory services” for indebted consumers, claiming to be able to use provisions of the Fair Debt Collection Practices Act (FDCPA) to reduce (by “at least 60%”) or eliminate credit card debt.  The firms promised improved credit scores and zeroed-out debt in exchange for thousands of dollars in up-front fees.  The firms also claimed to be affiliated with the CFPB and the Federal Trade Commission (FTC).

The general approach of the firms involved telling consumers to stop paying their debts immediately and sending a boilerplate “Notice and Demand for Verification of Debt” to creditors or debt collectors, asking questions about the debt owed.  If the collector failed to provide the information requested within 45 days, the firms would simply deem the debt invalid and offer further “credit restoration” to the consumers.  These measures do not, as a matter of law, eliminate debt.

In October 2017, the CFPB filed a complaint in Baltimore federal court against the firms, alleging violation of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act (CFPA).  The CFPB alleged the companies were lying to consumers about what their services could actually accomplish and about being officially endorsed by the CFPB and the FTC.

CFPB obtains default judgment

The debt relief firms failed to defend themselves against the CFPB’s case.  As a result, the court entered a default judgment against the firms, finding that they violated the TSR and CFPA by, among other things:

  • Demanding and receiving fees out of proportion with any amount saved under their plans
  • Receiving fees before they had renegotiated or reduced any debts with the creditor and before providing proof of any debt relief
  • Lying about providing “at least 60%” reduction in principal amount owed
  • Telling consumers to stop paying their debts without telling them that they did still owe those payments, that their credit scores would suffer, and that they could be sued for non-payment

The default judgment calls for $5 million in restitution for damaged customers and penalizes the firms another $16 million in civil penalties for their actions.  The order also prohibits the firms from providing debt relief or credit repair services in the future.

If you’re in need of honest and effective legal help with crippling consumer debt, contact the Maryland offices of the Bankruptcy and Mortgage Law Center at Haeger Law for a free consultation at 888-463-3520.