Want to get the CFPB enforcement staff’s attention? Running a debt-relief scheme is a good start.
Earlier this week, the CFPB announced that it obtained a preliminary injunction against World Law Group, its affiliated companies and its owners for running an illegal debt-relief scheme. The Complaint filed in US Federal District Court claims that World Law collected at least $67 million in unlawful fees from 21,000 financially vulnerable consumers under the false promise of providing legal representation to negotiate debt settlements.
The facts are particularly egregious and show why debt-relief schemes are such a problem for consumers – especially those who are already in financial trouble. According to the CFPB allegations, World Law advertised itself as a “debt-relief law firm” and claimed that consumers would be assigned a “team of attorneys,” including local counsel, to negotiate and settle debts. When a customer enrolled, the company would direct the customer to stop paying creditors and make one single monthly payment to World Law. World Law would then allegedly deduct an upfront fee.
According to the CFPB, non-lawyers provided most of the essential debt-relief services. Customers were never assigned local counsel; and, when creditors sued, World Law offered customers boilerplate pleadings and instructed the customers to file pro se pleadings.
In its Complaint, the CFPB claims World Law committed unfair, deceptive or abusive acts or practices and violated the FTC’s Telemarketing Sales Rule. CFPB Director Richard Cordray explained, “We took action today against World Law Group for an alleged debt-relief scheme that lured consumers with false promises of help from lawyers and collected millions in illegal upfront fees. … We are seeking to put an end to this scheme and prevent more consumers from being harmed.”
As of today, the court has only issued a preliminary injunction rather than a final determination in the case, but it doesn’t look good for World Law.
Debt-relief schemes are a big problem for consumers, but they are also a problem for the financial services industry.
This case is particularly interesting to me as an industry-side consumer finance attorney. In my practice, I am seeing increasingly frequent letters from debt-relief “attorneys” directed to companies. Often, these letters include general statements that the account may be incorrect, make broad requests for information, and demand that a company cease collecting its account. I have seen letters that reference completely unrelated and inapplicable case law. Sometimes the letters are drafted for a credit card company but sent to an installment lender. And, many of these are sent under the unsigned or electronically generated signature of an attorney.
Of course, there are legitimate consumer law attorneys who send letters on behalf of clients; and, a creditor should never ignore a letter sent by a law firm or attorney. But, it looks like the CFPB still has some work to do in cleaning up the debt-relief business.
Shutting down illegal debt-relief companies is good for consumers and for the financial services industry.