The CFPB recently issued a consent order against two payment processors and their owners – individually – resolving an administrative enforcement proceeding based on alleged violations of the Consumer Financial Protection Act and the Sell By Rule. telemarketing. Payment processors provided account management and payment processing services to consumers across the United States who were enrolled in debt relief programs. The consent order requires payment processors and individual owners to repay consumers $8.7 million in fees and pay a civil penalty of $3 million. In addition, individual owners and one of the payment processing entities are permanently excluded from the debt relief payment processing and account maintenance sectors.
The CFPB made several specific findings of violation in the Consent Order:
- payment processors designed and implemented policies and procedures that allowed student loan debt relief service providers to levy advance fees in violation of the TSR;
- the payment processors were affiliated with debt relief service providers that required consumers to place funds for debt relief service fees in accounts operated by the payment processors in violation of the TSR;
- payment processors were paying commissions to third-party marketing companies for consumer business referrals in violation of the TSR;
- payment processors have engaged in deceptive acts or practices by falsely representing that they are independent of debt relief service providers in violation of the CFPA; and
- payment processors engaged in deceptive acts or practices in violation of the CFPA when they failed to deliver on their promises to consumers to withhold fee payments to debt relief service providers until confirmation that (1) the consumers complied with their debt consolidation agreements and (2) the debt relief service provider had won the charges.