Newsletters

Search Newsletters
Search by date
Choose From Date
Choose To Date
SearchClear

CFPB Weekly Update: The CFPB Files Another Enforcement Action: This Time, It Is Against A Company That Offers Debt Assistance

May 31, 2013

On May 30, 2013, the CFPB filed a lawsuit in the United States District Court for the Southern District of Florida against American Debt Settlement Solutions, Inc. and its principal, Michael DiPanni, for alleged violations of the CFPA and the Telemarketing and Consumer Fraud and Abuse Prevention Act (based upon their alleged violations of the Telemarketing Sales Rule.)  For those of you who do not know what the Telemarketing and Consumer Fraud and Abuse Prevention Act is, you should.  As the name implies, this statute prohibits fraud during the course of any type of advertising, including internet advertising.  The statute, while usually enforced by the FTC, has a carve out for the CFPB that allows the CFPB to file enforcement actions against any “covered person” under the CFPA if the person engages in unfair, deceptive or abusive acts and practices with respect to telemarketing or other types of advertising.  American Debt Settlement Solutions, Inc. is a “covered person” under the CFPA because it holds itself out as a company that helps consumers resolve their debts in exchange for a fee.  Mr. DiPanni is a “related person” because he owns and manages the company.  In addition, the CFPB alleges that American Debt Settlement Solutions violated the CFPA by engaging in unfair, deceptive and abusive acts and practices.  The Complaint alleges the following:

  • In exchange for a fee of 15% of the consumer’s enrolled debts and a $99.00 service fee, American Debt Settlement Solutions promised (through the internet and contracts with customers) that it would renegotiate, settle, reduce, or otherwise alter the terms of at least one debt between consumers and one or more unsecured creditors.
  • American Debt Settlement Solutions entered into a contract with a payment processor that managed, processed and administered the payments.  This payment processor collected money from the customer (through ACH from the customer's bank account)  and distributed it to the creditors.
  • American Debt Settlement Solutions told its customers to stop paying their creditors and instead pay the payment processor when the customer's account reached a "sufficient balance."  The debt relief fees that American Debt Settlement Solutions charged were taken out before any creditor was paid.
  • American Debt Settlement Solutions failed to renegotiate, settle, reduce, or otherwise alter the terms of a single debt for approximately 89 percent of the consumers who enrolled in its debt-relief programs.
  • American Debt Settlement Solutions had always known that it was nearly impossible to renegotiate, settle, reduce, or otherwise alter the terms of debts under $700, but nonetheless enrolled consumers in its program with debts under $700 without disclosing this limitation.
  • American Debt Settlement Solutions customers had paid more than $9.9 million, but the company processed less than $2 million in payments to creditors in settlement of their debts.

This case presents an interesting twist because the CFPB relies upon the UDAAP statute to form the crux of the allegations against American Debt Settlement Solutions.  Although the CFPB also asserts claims under the Telemarketing and Consumer Fraud and Abuse Prevention Act, that law is, for the most part, another UDAAP law under a statute other than the CFPA.  So once again, this lawsuit reminds us that the CFPB does not have a terribly high threshold that it must cross to bring some enforcement actions.  If the CFPB believes that you are engaging in unfair or deceptive conduct, it will bring an enforcement action under the UDAAP statute as either an additional throw in claim or a stand-alone claim when the alleged acts and practices to do not fit within the elements of more substantive claims.

That is all for this week.  Remember that our updates are on the website, www.cfpaguide.com/weeklyupdates.

Our Story

Sutherland Asbill & Brennan LLP is an international law firm helping the Fortune 100, industry leaders, sector innovators and business entrepreneurs solve their biggest challenges and reach their business goals. Dedicated to unfaltering excellence in client service, we are known for our business savvy and industry intelligence, providing creative and custom solutions for each of our clients. Industry and business experience makes the difference for our clients.

click to watch Videocast: DOL Fiduciary Rule Litigation Impacts
Videocast: DOL Fiduciary Rule Litigation Impacts
Atlanta, GA
Washington, DC
© 2016 Sutherland Asbill & Brennan LLP / Sutherland (Europe) LLP
MYBRIEFCASE
Add this page to MYBRIEFCASE
Add Page to MYBRIEFCASE
News/Commentary - CFPB Weekly Update: The CFPB Files Another Enforcement Action:  This Time, It Is Against A Company That Offers Debt Assistance
Current MYBRIEFCASE Pages
Save ChangesDownload MYBRIEFCASEClear All