The Consumer Financial Protection Bureau has filed suit against two companies, Federal Debt Assistance Association, LLC, and Financial Document Assistance Administration, Inc., both companies operating as FDAA; their stated parent company and service provider Clear Solutions, Inc.; and their owners for deceiving consumers and violating the Consumer Financial Protection Act (12 U.S.C. §§ 5531(a), 5536(a)), and the Telemarketing Sales Rule (16 CFR Part 310). According to the Bureau’s complaint, FDAA falsely represented the company as being affiliated with the federal government and falsely promised to eliminate consumers’ debts and improve their credit scores for thousands of dollars in advance fees.
"FDAA and its owners lied to financially vulnerable consumers to line their pockets with cash," said CFPB Director Richard Cordray. "Today’s lawsuit seeks to stop these deceptive practices, impose civil money penalties, and return to cheated consumers the fees they paid to these companies."
FDCPA. According to the complaint, FDAA promised to eliminate consumers’ unsecured debts and improve their credit scores, primarily by using the debt-verification process set out in the Fair Debt Collection Practices Act. However, the companies’ debt validation programs "were merely debt-management programs that misled consumers about the results that could be achieved under the FDCPA’s debt-verification process."
Failure to disclose. The complaint alleges that FDAA failed to make proper disclosures about not paying debts. FDAA instructed consumers to stop making payments on the debts enrolled in their program. However, they failed to disclose that not making payments may result in the consumer being sued by creditors or debt collectors and may increase the amount of money the consumer owes due to the accrual of fees and interest, according to the complaint.
Advance fees. The CFPB charged that FDAA took illegal advances for debt-relief and credit-repair services without achieving certain results, a violation under the TSR. It is a violation of the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for goods or services represented to remove derogatory information from, or improve, a person’s credit history, credit record, or credit rating until and unless:
- the time frame in which the seller has represented all of the goods or services will be provided to that person has expired; and
- the seller has provided the person with documentation in the form of a consumer report from a consumer-reporting agency demonstrating that the promised results have been achieved.
Relief. The CFPB’s complaint seeks monetary relief, injunctive relief, and civil money penalties.
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