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From Banking and Finance Law Daily, October 3, 2013

CFPB to settle TSR violations with debt-settlement payment processor

By John M. Pachkowski, J.D.

The Consumer Financial Protection Bureau has announced an enforcement action against Meracord LLC, a leading debt-settlement payment processor, for allegedly helping others to collect millions of dollars in illegal upfront fees from consumers. The bureau is seeking approval of a consent order from a federal district court that would require Meracord and its Chief Executive Owner and owner, Linda Remsberg, to halt all illegal activities and to pay a $1.376 million civil penalty.

The bureau noted that this action is part of its comprehensive effort to prevent consumer harm in the debt-settlement industry. In the lead up to this case, the CFPB had been pursuing actions against several debt-settlement providers that charged consumers illegal advance fees with Meracord’s assistance. The bureau obtained judgments against two of these companies – Payday Loan Debt Solution, Inc. and American Debt Settlement Solutions, Inc. The CFPB also filed a complaint against four others—Mission Settlement Agency, the Law Office of Michael Levitis, Premier Consulting Group, LLC, and the Law Office of Michael Lupolover (see story in Banking and Finance Daily, May 8, 2013).

In its complaint, the bureau charged that Meracord and Remsberg violated the Federal Trade Commission’s Telemarketing Sales Rule by helping debt-settlement companies charge consumers upfront fees. The rule prohibits debt-settlement companies from charging consumers such fees before settling any of their debts. The rule protects consumers from the risk of spending money on services that may not materialize and then ultimately being left even deeper in debt.

The complaint alleged that Meracord processed thousands of these illegal advance fees since October 2010. In total, the CFPB believes that Meracord helped debt-settlement companies charge millions of dollars in unlawful fees to more than 11,000 consumers in multiple states. Nearly 5,000 of those consumers’ accounts were closed without any of their debts being settled.

Under the proposed consent order, which the defendants have agreed to, Meracord and Remsberg would be barred from processing payments for debt-settlement companies and for members of the related mortgage-settlement industry. The defendants would be subject to monitoring by the CFPB and would be required to make reports to the CFPB to ensure their compliance. The defendants would also have to pay a civil money penalty of $1.376 million.

Commenting on the enforcement action, CFPB Director Richard Cordray said, “Today we are taking action against Meracord, a company that made it possible for debt-settlement companies across the country to charge consumers illegal fees. By taking a stand against those who facilitate illegal activity, we can root out harmful behavior across the debt-settlement industry and better protect consumers.”

Companies: American Debt Settlement Solutions, Inc.; Meracord LLC; Mission Settlement Agency; Payday Loan Debt Solution, Inc.; Premier Consulting Group, LLC

LitigationEnforcement: ConsumerCredit CFPB DebtCollection EnforcementActions

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