Deceptive debt relief services profit off of vulnerable American consumers
WASHINGTON – U.S. Senators John Hickenlooper and Amy Klobuchar sent a letter urging the Consumer Financial Protection Bureau (CFPB) to protect consumers from deceptive and illegal debt collection practices. The letter takes specific issue with abusive tactics in the telemarketing of debt relief services:
“These predatory practices disproportionately affect already vulnerable consumers, worsening their financial and credit situation,” wrote the senators. “By intensifying its enforcement efforts, the CFPB can effectively address these uncertainties, thus safeguarding both consumers and businesses…”
When a consumer defaults on a debt, the lender will often hire a third-party debt collector to recoup the loss. However, debt collectors will sometimes use illegal “quick fix” credit repair schemes that promise unrealistic credit score improvements or require consumers to pay fees before they can pay off their debt. These abusive schemes target vulnerable consumers, including students and economically disadvantaged Americans, worsening their financial situation.
In their letter, the senators urge the bureau to strengthen enforcement of the Federal Trade Commission’s Telemarketing Sales Rule (TSR), which makes it illegal to collect advanced fees from people who sign up for debt collection services. The senators note that bad actors have continued to violate the TSR even after recent lawsuits cracking down on the practice. The senators argue that the CFPB must double down on its efforts to enforce the prohibition.
Full text of the letter is available HERE and below:
Director Chopra,
We are writing to request that the Consumer Financial Protection Bureau (CFPB) promptly issue strong, consistent enforcement criteria concerning the Telemarketing Sales Rule’s (TSR) advance fee prohibition.
The CFPB’s mission is to “make consumer financial markets work for consumers, responsible providers, and the economy as a whole… [and] protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.” To fulfill this mission, it is imperative not only to provide consumers with timely information about their rights but also to ensure rigorous enforcement aimed at deterring violations.
However, following the CFPB vs. Progrexion Marketing Inc., et al. court ruling, unscrupulous telemarketers continue to evade the court’s decision. This puts consumers at ongoing risk to “quick fix” credit repair schemes that typically promise rapid, unrealistic improvements in one’s credit score, often through unethical or illegal means. These predatory practices disproportionately affect already vulnerable consumers, worsening their financial and credit situation.
The lack of clarity in the CFPB’s enforcement agenda, including differing interpretations and potential inconsistencies in rule application, can result in these bad actors falling through the cracks. By intensifying its enforcement efforts, the CFPB can effectively address these uncertainties, thus safeguarding both consumers and businesses by holding wrongdoers accountable under the TSR.
Our nation’s federal laws are designed to be applied uniformly across all entities in the marketplace. It is essential that the CFPB ensures consistent enforcement and supervisory approaches, ensuring that the rules are clear for all market participants. By adopting a more robust enforcement agenda, the CFPB can accomplish this goal and strengthen its commitment to consumer protection and an equitable marketplace.
We strongly urge the Consumer Financial Protection Bureau to expeditiously implement a uniform and intensified enforcement agenda, thereby clarifying its regulatory approach with respect to the Telemarketing Sales Rule’s advance fee prohibition. Such a step would curb deceptive and abusive practices in the telemarking of debt relief services and underscore the Bureau’s unwavering commitment to its mission.
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