WASHINGTON (8/26/14)--Two federal agencies took action against debt relief companies that they claim used deceptive tactics to collect fees for debt settlement services. The Consumer Financial Protection Bureau (CFPB) announced an enforcement action against Global Client Solutions, while the Federal Trade Commission has asked a federal court to shut down a scam that claimed its debt relief programs were sanctioned and approved by the federal government.
Global Client Solutions, a debt-settlement payment processor, allegedly helped other companies collect tens of millions of dollars in illegal upfront fees from consumers, according to the CFPB complaint. The bureau has asked a federal district court to approve a consent order that would require the company and its two owners to halt all illegal activities and to pay over $6 million in relief to consumers, as well as a $1 million civil penalty.
According to the CFPB's complaint, since October 2010, Global Client Solutions processed tens of millions of dollars in illegal advance fees from tens of thousands of consumers. The company will be subject to monitoring by the CFPB and will be required to make reports to the CFPB to ensure their compliance.
According to the CFPB, the complaint is not a finding or ruling that the defendants have actually violated the law. The proposed court order has been filed with the Court for the Central District of California and will have the full force of law only when signed by the presiding judge.
Separately, the FTC asked a federal court last week to shut down a scam that targeted financially distressed Americans by pitching a phony debt relief and credit repair program on two websites, called the "Bill Payment Government Assistance Program." It claimed to offer up to $75,000 in debt relief and improved credit scored within 30 days to consumers.
According to the complaint, consumers were told that in exchange for an advance "service charge" of $900 to $1,100, the defendants would pay off the consumers' debts. Scammers would ask consumers for details of their outstanding debt, including account numbers, and then arrange bogus electronic payments that gave consumers the impression their debts were in fact being paid.
Once consumers paid the service charge via a money transfer service, the scammers would then reverse the payments made to consumers' bills, leaving consumers without the promised debt relief or improvements to their credit scores or limits.
The sites claimed the program was governed by the Recovery Accountability and Transparency Board, and the FTC alleges YouTube videos created by the scam's operators included an audio recording of Obama saying, "I approve this message."
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