The Consumer Financial Protection Bureau filed a significant enforcement action on Jan. 9 against several companies and individuals marketing student loan debt-relief services for credit reporting violations, charging advance fees and deceptive conduct.

The Bureau’s complaint alleges that Monster Loans and Lend Tech Loans obtained from a credit reporting agency “prescreened lists” of consumers having student loans under the guise of using the information to offer mortgages. Instead, the companies sold the data to various student loan debt-relief companies who then marketed debt relief in violation of the Fair Credit Reporting Act.

The debt-relief companies named in the suit operated as DocuPrep Center, Certified Document Center, Certified Doc Prep Services, Assure Direct Services, Direct Document Solutions, Secure Preparation Services and Docs Done Right.

The CFPB seeks to hold individual stakeholders liable under several theories. In addition, it is alleged that in selling the lists to debt-relief companies, the data brokers (Monster Loans and Lend Tech Loans) are liable under the Telemarketing Sales Rule and the Consumer Financial Protection Act of 2010 for charging advance fees, misrepresentation and deception.

The Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681m(d), governs the acquisition, use and disclosure of consumer reporting information for a prescreened list. The list is comprised of consumer contact information for those who match a specific set of criteria as provided by the company to a consumer reporting agency. The company then must make a “firm offer of credit” to the consumer along with providing specific notices. Consumers have a right to opt-out of prescreens. Complying with the regulations is a tricky process.

The Telemarketing Sales Rule covers not only outbound telemarketing calls but it also can apply to inbound calls like those responsive to direct mail solicitations or even a website. Debt-relief services are specifically regulated as illustrated by the Bureau’s complaint. Section 310.4(a)(5) of the Telemarketing Sales Rule prohibits sellers or telemarketers of debt-relief companies from collecting an “advance fee” for services. Debt-relief companies may not collect a fee until essentially they have done the work (settled, reduced, or otherwise altered the terms of a loan) and the consumer has made at least one payment under such plan. In addition, several disclosures must be made at certain times as detailed in the Rule.