Debt Settlement Firm to Repay Consumers $5.4M Under Agreement With CFPB

A District Court judge in Massachusetts has been asked to sign off on a settlement between the Consumer Financial Protection Bureau and a debt settlement company that was sued for allegedly engaging in abusive and deceptive acts and practices by charging fees before it performed any services and collecting higher fees than it was supposed to. Under the terms of the proposed settlement, the defendant will pay consumers $5.4 million out of a $7.7 million judgment along with a civil money penalty of $1 while also being prohibited from engaging in the practices alleged by the CFPB.

A copy of the proposed stipulated final judgment and order in the case of the Bureau of Consumer Financial Protection v. DMB Financial, LLC can be accessed by clicking here.

The Bureau sued the defendant back in December 2020, accusing the defendant of violating the Telemarketing Sales Rule and the Consumer Financial Protection Act. When it settled debts on behalf of its customers, the defendant allegedly based the fees that it charged on the amount of the debt when it was settled and not the amount at the time of enrollment. The discrepancy led to the defendant charging its customers more because interest and fees often continued to accrue on the unpaid balance until the debt was settled, according to the complaint.

“DMB Financial preyed on consumers who were struggling financially, charging millions of dollars in illegal upfront fees and hiding the true cost of its services,” said CFPB Acting Director Dave Uejio, in a statement. “Charging upfront fees for debt settlement is a violation of federal law, and the CFPB will continue to act decisively when we see companies taking advantage of consumers in this way.”

Under the terms of the settlement, the defendant neither admitted to or denied the allegations made by the CFPB. Along with not charging consumers advance fees or fees based on the debt amount after the time of enrollment, the defendant is also prohibited from accessing consumers’ credit reports without a permissible purpose, and may not misrepresent how it determines its fees. It also must disclose to consumers how long it will take to make a bona fide settlement offer, and how much of each outstanding debt the consumer must accumulate before a settlement offer will be made.

The Bureau ordered the defendant to repay $7.7 million to affected customers, but only $5.4 million will be repaid based on the defendant’s financial condition. Of that, $2.2 million must be repaid within 40 days of the settlement’s effective date, another $2.8 million must be repaid within 244 days of that date, and the remaining balance must be repaid within 365 days of the effective date.

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