The CFPB, joined by the Minnesota Attorney General’s Office, North Carolina Department of Justice, and the Los Angeles City Attorney, filed a lawsuit in the U.S. District Court for the Central District of California against two companies involved in the marketing and sale of student-loan debt-relief services as well as individual owners and managers of the companies alleging violations of the CFPA, the Telemarketing Sales Rule (TSR), and various state laws.  The complaint also names three companies as “relief defendants” that are alleged to have served as conduits of funds between the two other company defendants and the individual defendants.

The complaint alleges that the defendants violated the CFPA and TSR by conduct that included: (1) charging and collecting advance fees before consumers had received any adjustment of their student loans or made any payments toward such adjusted loans, (2) misrepresenting the purpose and application of fees charged by the companies, their ability to obtain loan forgiveness, and their ability to lower consumers’ monthly payments, (3) failing to inform consumers that the companies automatically requested that student loans be placed in forbearance, and (4) submitting false information in applications for loan consolidation or income-driven repayment programs.  The individual defendants are alleged to have provided substantial assistance to the company defendants in connection with the TSR violations.

In addition to the counts alleging TSR violations that are brought jointly by the CFPB and state/city defendants, the complaint contains additional counts brought by each of the state/city plaintiffs alleging violations of their respective state UDAP and other laws by the defendants based on the conduct alleged in the complaint.

The complaint seeks injunctive relief as well as consumer redress and civil money penalties.  The court has entered a temporary restraining order freezing the defendants’ assets and has appointed a temporary receiver for two of the company defendants.  A hearing on the CFPB’s request for a preliminary injunction is scheduled for later this month.

On September 17, the CFPB announced that it would no longer defend its constitutionality in the appellate courts or before the Supreme Court.  The complaint in this action, which was filed on October 21, is the third enforcement action announced by the Bureau since announcing its change in position on its constitutionality and indicates that it is business as usual at the Bureau.  (The first enforcement action was filed on September 25 against a debt collector and its CEO and the second was filed on October 1 targeting pension advance products.)