Listen to this post

On May 5, the CFPB announced that it has sent payments totaling more than $22 million to approximately 6,500 individuals who were harmed by a Maryland-based debt-relief and credit-repair company that marketed and sold debt-relief and credit-repair services nationwide from 2016 to 2020. In 2021, a federal court entered a stipulated final judgement and order against the company and its executives for allegedly deceiving consumers into hiring the company with false promises to lower or eliminate their credit-card debts and to improve their credit scores in violation of consumer financial protection laws.

On May 1, The FTC announced that a federal court entered stipulated final judgments and orders against three individuals and their affiliated companies who allegedly operated a credit card debt relief scheme in Tennessee. In its original complaint filed in November 2022, the FTC alleged that the individuals and their companies operated as a consolidated enterprise and falsely promised their products would help consumers eliminate or substantially reduce their credit card debt. At the time the FTC filed the complaint, a federal court agreed to freeze the defendants’ assets and appoint a receiver over the businesses while the case took place. The orders (available here, here, and here) provide for the following penalties against the individuals and their companies:

  • Ban on debt relief. The defendants are permanently banned from advertising, selling, or assisting in any debt relief product or service.
  • Ban on telemarketing. The defendants are permanently banned from participating in telemarketing.
  • Prohibition against deceiving consumers. The orders broadly enjoin the defendants from deceiving consumers about any other product or service they sell or market.
  • Surrender assets. The orders require the defendants to surrender certain property interests and assets contained in multiple bank accounts that will be used to provide any possible refunds to affected consumers.

Most recently, the FTC announced that on May 8 the agency filed two new lawsuits against three debt relief companies for allegedly engaging in student loan forgiveness scams in which the companies impersonated the Department of Education to steal more than $12 million from consumers.

Putting it into Practice: As evidenced by the recent flurry of enforcement actions against companies allegedly engaged in debt relief and credit repair schemes, the CFPB and FTC remain committed to taking aggressive steps to prevent such schemes from harming consumers. Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, recently noted that agency focus on these issues with only continue to sharpen as consumer credit card delinquencies continue to surge. Thus, financial services companies offering products relating to debt relief and credit repair should review these recent enforcement actions and be keenly aware of the heightened agency scrutiny of these product offerings.