In the latest chapter of its “comprehensive effort to prevent consumer harm in the debt-settlement industry,” the CFPB has announced the settlement of an enforcement action brought against “a leading debt-settlement payment processor” and its CEO and owner.  In its complaint, the CFPB alleged that the defendants had violated the Telemarketing Sales Rule by assisting and facilitating the charging of unlawful advance fees by debt-relief companies. 

Among the companies for whom the processor was alleged to have processed payments were several debt-relief companies that have been the subject of CFPB enforcement actions.  According to the CFPB’s complaint, the processor, when it transmitted the fees to the debt-relief companies, knew that it had not yet transmitted funds to creditors of the consumers whose accounts were charged the fees. 

Under the proposed consent order, the defendants would be permanently enjoined from providing payment processing services to any providers of debt relief or mortgage assistance relief services and would be required to pay a $1.376 million civil penalty. 

The CFPB’s decision to target a payment processor because of its position as a “centralized chokepoint” for unlawful debt-relief companies closely parallels efforts now being taken by regulators in connection with payday lending.  Those regulators include the Department of Justice (which is reported to have issued subpoenas to several banks and other entities that process payments for payday lenders), the FDIC and the New York Department of Financial Services.  In particular, the regulators are focusing on the role played by banks and others in processing ACH payments for payday lenders who are not operating in compliance with the laws of the states where their borrowers reside.