Regulation

CFPB issues $1.376 million order against debt settlement payment processor Meracord

cfpbThe CFPB issued a proposed court order, which imposes a $1.376 million penalty, on Thursday against debt settlement payment processor Meracord and its owner Linda Remsberg for allegedly helping debt settlement firms collect illegal fees from consumers.

The agency alleges that Meracord helped many debt settlement companies collect money that should have been put towards a consumer’s debt but went to the companies in the form of illegal advance fees, a practice prohibited by the Telemarketing Sales Rule.

Under the TSR, companies that engage in debt settlement services are prohibited from collecting or charging a fee unless they first alter or reduce a borrower’s debt, thereby protecting consumers from paying for services that may never come to fruition.

“We believe that Meracord knew or should have known that it was processing illegal upfront fees charged to consumers in violation of this rule,” CFPB Deputy Director Steven Antonakes said in a press call on Meracord enforcement. “And as we allege in our complaint, we believe Meracord processed such payments for more than 11,000 consumers.”

Under the terms of the court order, Meracord and Remsberg would be banned from processing payments of any kind related to debt relief or mortgage assistance and would be required to undergo monitoring by the CFPB and to send reports to the agency to ensure compliance with the court order.

The CFPB alleged that Meracord processed $11 million in allegedly illegal fees from October 2010 to July and announced that it has filed complaints against four other debt settlement agencies believed to be charging illegal fees.

“The message we are sending today reinforces a point we have made before: we are working to ensure federal consumer laws are being followed at every stage of the process, including by those who unlawfully facilitate illegal conduct by others,” Antonakes said. “If a business is enabling bad actions that hurt consumers, then we will use our authority to stop them. We are making the point here and it applies to all companies that do business with consumer financial providers.”

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