Appeals Court Affirms Ruling Holding Individual Liable for Violations of CFPA, TSR

The Court of Appeals for the Ninth Circuit has affirmed a lower court’s ruling holding an individual liable for violations of the Fair Credit Reporting Act, the Telemarketing Sales Rule, and the Consumer Financial Protection Act after he — and other defendants — were sued by the Consumer Financial Protection Bureau for allegedly obtaining individuals’ credit reports illegally and charging advance fees for debt relief services.

A copy of the ruling in the case of CFPB v. Jawad Nesheiwat and Chou Team Realty can be accessed by clicking here.

Nesheiwat was ordered to pay $20 million for his role in the scam, in which the credit reports of 7 million individuals with student loan debt were obtained by the defendants under the guise of selling them mortgages. Instead, the defendants peddled student loan debt relief services and purportedly collected $15 million in upfront fees from consumers before any adjustments to their student loans were made or any payments to the individuals’ loan servicers were made, which is a violation of the TSR.

The panel of judges from the Ninth Circuit rebuffed every argument put forth by Nesheiwat that he should not be held personally liable. The Appeals Court ruling cites “undisputed” evidence indicating how the defendant “recklessly violated” the FCRA and the TSR, while he just “violated the CFPA” without doing so recklessly.

“Nesheiwat is individually liable for corporate violations of the CFPA,” the panel wrote in its ruling. “He ‘participated directly’ in these deceptive practices and ‘had the authority to control them.’ Nesheiwat was also ‘recklessly indifferent to the truth or falsity of the misrepresentations,’ and did not attempt to verify the truthfulness of statements” being made by the companies he controlled.

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