In case you missed it, earlier this month, the CFPB reached settlements with two entities it accused of wrongdoing.  On April 6, 2021, the CFPB issued a press release detailing the Consent Order it reached with Yorba Capital Management, LLC (Yorba) and its sole owner Daniel Portilla, Jr. (Portilla), and on April 13, 2021, the CFPB issued a press release  detailing the Complaint filed and Stipulated Final Judgment and Order it reached with SettleIt, Inc (SettleIt)

The Yorba/Portilla Consent Order

Here, the CFPB alleged that Yorba and Portilla mailed notices to consumers in an attempt to collect a debt that falsely represented that consumers would be sued and that there would be further legal action if the consumers did not pay the debt shown on the notices. Although the accounts had never been sent to an attorney for litigation, they were titled “Litigation Notice” and even included a spot for case numbers.

Further, the letters stated, “You are hereby notified that a recommendation to file a lawsuit to collect this debt may be the next step resulting in a judgment entered against you,” and “to avoid any further legal action, you need to contact our office within 10 days of this notice; otherwise, we will assume you do not intend to pay this debt and litigation will be commenced immediately.”  The notices also informed consumers that “[a] judgment is a serious legal matter and several methods to collect a judgment are available to us” and listed ways in which Yorba could collect on a judgment if it were to obtain one.  Some consumers called in response to the notice; however, the CFPB alleged that Yorba’s representatives would provide little (if any) information about the alleged debt. Instead, consumers were verbally threatened with lawsuits or arrests.

According to the CFPB, Despite including this language in the letters, Yorba and Portilla did not retain lawyers and never filed lawsuits against consumers. Thus the CFPB alleged that the letters misled and falsely threatened legal action against consumers in violation of the CFPA, 15 USC §§ 5531(a) and 5536(a)(1)(B), and the FDCPA, 15 USC §§ 1692e(5) and 1692e(10).   The CFPB further noted that “false representations in the letter were material. Statements about the imminence of a lawsuit and the implication that legal action has already been taken are important to consumers and are likely to affect their conduct as to whether they pay the alleged debt.”

The Consent Order permanently bans both Yorba and Portilla from the debt collection business, includes a judgment of $860,000 (which is suspended due to an inability to pay), and a civil penalty payable to the CFPB of $2,200.00

The SettleIt Stipulated Judgment

In this action, the CFPB filed a complaint against SettleIt, an online debt settlement company.  According to the CFPB, SettleIt, presents itself as an independent debt-settlement company that helps consumers negotiate with creditors like CashCall and LoanMe. But SettleIt is affiliated with CashCall and LoanMe; the same individual owns SettleIt and CashCall, and LoanMe is tied to SettleIt through loans and agreements.

The CFPB claimed that SettleIt abused consumers’ trust by charging fees to negotiate settlements that favor those companies and steered distressed consumers into taking out expensive loans with CashCall and LoanMe while hiding the fact that SettleIt took its debt-settlement fees from these loan proceeds. According to the CFPB, SettleIt kept consumers in the dark about its relationships with CashCall and LoanMe, and despite its ties with CashCall and LoanMe, even included language in call scripts saying “we are not owned or operated by any of your creditors.”

Although SettleIt did not admit or deny the allegations, the Bureau and SettleIt filed a proposed Final Judgment and Order requiring SettleIt to return at least $646,000 in fees to consumers, pay a $750,000 civil penalty, and stop settling debts for creditors with which it shares an ownership interest.

“SettleIt’s strategy of steering consumers into sweetheart deals with its confederates was illegal,” said CFPB Director David Uejio. “The CFPB will not tolerate companies that purport to represent consumers, but instead abuse their trust in a self-dealing scheme. This case provides a clear example of what Congress intended to prohibit when it created the CFPB and gave it authority to prevent abusive practices.”

insideARM Perspective:

In light of Director Ueijo’s previous statements that protecting consumers is his top priority, the Consent Order in Yorba and Stipulated Judgment in SettleIt, are not all that surprising.  However, what is a bit surprising is that the CFPB continues to uncover schemes that are relatively egregious violations of law and maybe even of common sense. One has to wonder whether the letters in Yorba or the call scripts in SettleIt were the subjects of a compliance review.  The allegations in these cases do not appear to be in the proverbial gray area. It’s hard to imagine that any compliance professional would approve the letter in Yorba, with all of its misstatements and threats, or the call scripting in SettleIt, which appears to be patently false on its face.  Assuming neither entity intended to violate the law, perhaps these results could have been avoided if they sought a compliance review of these communications before interacting with consumers.  These cases should serve as another reminder that compliance should be an integral part of any Accounts Receivable Entity’s process in developing consumer-facing communications.

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