The CFPB’s first publicly announced criminal referral has resulted in the entry of guilty pleas by a debt settlement company and its principal, according to a Reuters report. The referral, which was made to the U.S. Attorney for the Southern District of New York, arose out of the CFPB’s investigation of two debt-relief service providers and related entities and was announced by Director Cordray at a May 2013 press conference.
The CFPB had also filed a civil complaint in the SDNY federal district court against the debt settlement company and its principal 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).
The guilty pleas were reported to have been entered on conspiracy charges of mail and wire fraud. According to Reuters, the company and its principal agreed to forfeit $2.2 million as part of the plea agreement. The principal reportedly faces up to 10 years in prison, although the actual sentencing guidelines range is likely lower than 10 years, while the company reportedly faces an additional fine of up to $4.39 million. It was also reported that four other employees of the company had previously pleaded guilty and charges against a fifth employee are still pending. The principal’s attorney is reported to have told the judge assigned to the criminal case that the CFPB plans to dismiss the civil lawsuit.
The CFPB has also named individuals as defendants in a number of other enforcement actions it has filed. Based on reported statements by Director Cordray that the CFPB is committed to pursuing individuals, and not just companies, when exercising its enforcement authority, the CFPB can be expected to continue to name individual defendants in enforcement actions. In addition, given that Director Cordray stated when he announced the CFPB’s first criminal referral that the CFPB would be looking for more opportunities “to coordinate and collaborate” with the U.S. Attorney, more criminal referrals by the CFPB of both companies and individuals can also be expected.