The CFPB has filed a lawsuit in a Maryland federal district court against: (1) Access Funding, LLC (Access), a limited liability company that purchases structured settlements from consumers; (2) Access’ managing member limited liability company and Access’ successor limited liability company; (3) three individual principals of Access; and (4) an attorney who allegedly provided advisory services to consumers who sold structured settlements to Access.

The complaint alleges that many of the consumers who sold settlements to Access were lead-paint poisoning victims with cognitive impairments and that such consumers received “a steeply discounted lump sum in return for signing away their future payment streams.”  It also alleges that Access steered Maryland consumers to the attorney defendant so the attorney could satisfy a requirement of Maryland law for a consumer to submit a letter stating that he or she consulted with an independent financial advisor (IPA) for a court to approve a settlement sale.  Access allegedly paid the attorney $200 for each IPA letter.  The complaint also alleges that, while consumers waited to finalize the sale of a settlement, Access provided advances to many consumers who had an immediate need for cash and then told consumers that they were liable to repay the advances if they did not complete the sale and, if they were unable to repay the advance, that they were obligated to complete the sale.

The CFPB’s complaint claims that the defendants’ conduct violated the Consumer Financial Protection Act’s (CFPA) UDAAP prohibition.  More specifically, it alleges:

  • The attorney engaged in (1) unfair conduct because he provided virtually no advice to consumers and did not disclose his relationship with Access, (2) deceptive conduct because he represented to consumers that he provided independent financial advice, and (3) abusive conduct because consumers did not understand that he was not providing independent professional advice or that he did not take their individual circumstances or interests into account.
  • Access, Access’ managing member, and the individual principals knowingly or recklessly provided substantial assistance to the attorney’s UDAAP violations.
  • Access, Access’ managing member, and the individual principals engaged in abusive conduct in connection with the advances because consumers did not understand the risks or conditions of the advances, including that the advances did not bind them to complete the transactions.

In asserting jurisdiction over Access, the CFPB has not asserted that the purchase of structured settlements is a credit transaction or a consumer financial service.  Rather, the CFPB focuses on the advances made by Access, alleging that Access is a “covered person” under the CFPA because it “provided advances to consumers that were to be repaid through a deduction from the proceeds of structured-settlement transfers once those transactions were completed.  These advances were extensions of credit to consumers, and therefore consumer-financial products or services.”

The principals are alleged to be “covered persons” because their status with Access made them “related persons” under the CFPA.  The managing member is alleged to be “legally responsible for the liabilities of Access Funding.”

Earlier this year, the CFPB denied a petition by J.G. Wentworth, a purchaser of structured settlements, to set aside a CID as beyond the CFPB’s statutory authority.  One of the CFPB’s grounds for denying the petition was its claim that J.G. Wentworth may be providing “financial advisory services” to consumers in connection with offers to purchase structured settlements or annuities, which would constitute a “consumer financial product or service” subject to Dodd-Frank’s UDAAP prohibition.  (The CFPB has filed a petition to enforce the CID which is currently pending in Pennsylvania federal district court.)  In its complaint against Access, the CFPB alleges that the attorney defendant is a “covered person” because he provided “financial advisory services” in the form of advice to consumers regarding the structured settlements.