Debt Settlementsettlement of debts
It advertises itself with allegations that it has successfully bargained and paid more than $7 billion in debt for more than 300,000 users, the Bureau said, using telemarketing to find out more about potential customers' debt. If a client signs up for the debt settlement programme, he or she is obliged to pay into a special fund held with an FDIC-insured institution, the CFPB said.
As soon as the bank accounts have enough credit to make a settlement bid, the firm undertakes to negotiate with the clients in order to convince them to take less than the amount due. According to the arrangement used by the firm, all lenders would enter into bargaining in order to strengthen the defendant's "bargaining power".
But, according to the office, the firm knows that some believers are refusing to bargain with debt regulators, but do not tell clients about this fact. "The [...] company's policy of including in its debt settlement programme certain individuals in these situations has unduly exploited consumers' poor comprehension of the significant risk, cost or condition of participating in the debt settlement programme and it is abusive," the CFPB commented.
Even though the firm pledges to levy a royalty of 18 to 25 per cent of the amount due on the date the client signs the programme - only if it is negotiating debt relief, it calculates the full amount in other situations, as CFPB claimed, e.g. if a creditor just stops collecting without a settlement and a consumer independently negotiated a settlement.
Eventually, the office said the firm failed to clearly reveal to clients their right to the money in their bank account they could get back when they left the debt settlement programme. Although there is no doubt that a CFPB run by Mulvaney will be a very different creation, in this case the CFPB takes an understandingly hostile attitude towards what it regards as unreasonable or improper practice.
Here, the respondent used "vulnerable customers who turned to the firm to help them get out of debt," then CFPB director Richard Cordray said in a declaration. If the CFPB will remain as determined in tackling cases like these is a matter of urgency that only timing will tell.