CFPB Sues California Debt Settlement Firms for Receiving Illegal Advances | Ballard Spahr srl
Last week, the CFPB filed a lawsuit in California federal district court against Performance SLC LLC, Performance Settlement and Daniel Crenshaw, the owner and CEO of both companies. Performance SLC is a debt settlement company focused on federal student loans, and Performance Settlement is also a debt settlement company.
the complaint alleges that Performance SLC and Crenshaw violated the Telemarketing Selling (TSR) rule by charging illegal upfront fees to student loan borrowers seeking loan consolidation, loan forgiveness, or debt-driven repayment plans income for their federal student loans. Under the TSR, it is illegal to charge or receive a charge for debt relief services sold through telemarketing before the terms of the debt are changed or settled, and the consumer has made at least one payment. under the newly amended debt. See 16 CFR § 310.4 (a) (5) (i).
The Bureau alleges that Performance SLC violated the RST by imposing a fee on consumers at the time of registration or immediately after, before the terms of the debts were changed. He alleges that Crenshaw directly violated the TSR through his role in setting up the arrangements for the trust accounts used by Performance SLC to receive advances and also violated the TSR by providing substantial assistance to Performance SLC’s TSR violations. .
The complaint further alleges that Performance SLC violated the RST by failing to make the required disclosures. Under the TSR, any vendor or telemarketer in the sale of a debt relief service does not disclose, in a clear and visible manner, before customers agree to pay for those services, which customers own. funds held in accounts, that clients can opt out of the debt relief service at any time without penalty, and that, if clients opt out, they must receive all funds in accounts other than funds earned through the debt relief service. See 16 CFR § 310.3 (a) (1) (viii) (D). The Bureau alleges that Performance SLC violated the RST because it did not clearly and conspicuously disclose the following: (1) the clients owned the funds in their trust accounts; (2) if clients opt out of its program, the client must receive all funds in the account, less any fees earned by Performance SLC; and (3) the clients had the funds in their trust accounts and that those who terminated their service contract would receive all the funds in their trust accounts.
The complaint also alleges that Performance Settlement and Crenshaw violated the Consumer Financial Protection Act (CFPA) by engaging in deceptive acts or practices. According to the Bureau, Performance Settlement told consumers that Performance Settlement, a non-lending company, had considered and rejected these consumers for personal loans in order to entice them to sign up for Performance debt settlement services. Settlement. He also alleges that Crenshaw directly engaged in deceptive practices through his role in developing and approving marketing materials containing the misleading statements and that he also contributed substantially to the violations of the CFPA. of Performance Settlement.
Based on the aforementioned allegations, among others, the complaint seeks consumer redress, an injunction and the imposition of civil monetary penalties against Performance SLC, Performance Settlement and Crenshaw.