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CFPB announces criminal referral relating to alleged debt-relief scam

Posted in CFPB Enforcement

At a press conference yesterday in New York City, Director Cordray announced that the CFPB had made a criminal referral to the United States Attorney for the Southern District of New York arising out of the CFPB’s investigation of two debt-relief service providers and related entities.

In its press release about the referral, the CFPB announced that it had also filed a civil complaint in the SDNY federal district court against such providers, related entities and an individual alleging that the defendants had charged advance fees in violation of the FTC’s Telemarketing Sales Rule and engaged in deceptive and unfair practices in violation of the Consumer Financial Protection Act of 2010 (meaning Title X of Dodd-Frank).

In the complaint, the CFPB seeks to halt the defendants’ operations and obtain restitution and civil penalties as well as other relief.  Calling the action part of the CFPB’s “comprehensive effort to prevent consumer harm in the debt-relief industry,” the CFPB stated in the press release that it “is focusing not only on debt-relief service providers, but also on those who facilitate their unlawful conduct and who may also violate federal consumer financial laws.”

Although the CFPB has previously brought enforcement actions against debt-relief and mortgage modification service providers, it has not previously announced any criminal referrals in connection with those actions or other enforcement actions.  However, according to Director Cordray, the CFPB will be looking for more occasions “to coordinate and collaborate” with the U.S. Attorney.