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August 24, 2020

Scammers Rake in Millions But Only Have to Repay Thousands When Caught

Filed under: Finance — Edgar (aka MrConsumer) @ 5:04 am

The federal Consumer Financial Protection Bureau (CFPB) announced a series of proposed settlements it made with several companies that had been accused of charging upfront fees to students when signing up to use their debt relief services. However, under the telemarketing sales rule, a fee can only be charged after a debt is settled or renegotiated.

In total, these companies (along with two others who have not agreed to settle) allegedly collected more than $11.8 million in illegal fees. And while the settlements call for judgments in the full amount of money improperly collected, the amount of restitution and civil penalties that these companies actually have to pay may leave you speechless.


In one case, where the full $11.8 million was assessed against this particular defendant, here is all it has to repay:

full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 14 of this Section and …

14. Within 10 days of the Effective Date, Defendant must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $25,000 in partial satisfaction of the judgment as ordered in Paragraph 13 of this Section.

And to add insult to injury, here is the amount of civil penalties the company has to pay for violating the law.


…by reason of the violations of law alleged in the Complaint, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendant must pay a civil money penalty of $1 to the Bureau. This amount is based on Defendant’s limited ability to pay as attested to in his financial statements listed in Section VIII above.

One dollar? That’s the penalty for this multimillion dollar violation?

According to the CFPB, what defendants are required to pay is based on their current financial condition. So $25,000 is all the bureau is requiring. But what about that measly dollar in fines? According to the law, as long as the CFPB assesses even the most minimal of fines — like $1 — that will entitle the bureau to pay some amount of additional restitution to aggrieved consumers taken from their Civil Penalty Fund (a victim compensation fund). It has not yet been determined if each victim will be made whole. (The CFPB failed to provide us even with a sense of what percentage of their losses victims historically are able to collect from the fund.)

It is unfortunately too typical that victims get ripped off, and the alleged masterminds of these schemes get to pocket most of the money even after being caught.

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  1. The outcome may have been different if the 2016 election had gone another way. The CFPB hasn’t been all that interested in protecting consumers under the current leadership.

    Comment by MarcK1024 — August 24, 2020 @ 10:56 am
  2. This type of thing, will continue…
    [Content edited]

    Comment by LEN — August 24, 2020 @ 4:27 pm
  3. This is not at all surprising!

    Comment by Gert — August 24, 2020 @ 5:17 pm
  4. How amazingly relevant to my situation. I am looking to buy a house and I was referred to a credit repair agency by my mortgage financier, so I looked up credit repair agencies at the CFPB and read all the things they told me to watch out for, and sure enough, the agency wants an “monthly stipend” to pay for their services.

    Then they act all surprised when I don’t want there services and I went to a different mortgage financier. The credit repair company even had the gall to tell me it was founded by a former director of the CFPB. I told them “…then surely if he is the former director of the CFPB, he must know he is in violation of their guidelines!”

    Comment by Joel — August 26, 2020 @ 9:08 am
  5. The outcome would probably been the same if the 2016 election had gone another way. The CFPB hasn’t been all that interested in protecting consumers under any leadership.

    Comment by Kelly — August 30, 2020 @ 4:15 pm

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