In a first-of-its-kind collaboration, the Consumer Financial Protection Bureau (CFPB) and the Department of Justice (DOJ) have taken coordinated action against a debt settlement company by filing both a criminal indictment and a civil complaint on the same day.
On May 7, the U.S. Attorney’s Office for the Southern District of New York filed fraud charges against Mission Settlement Agency, its owner and three of its employees, alleging that the defendants deceived more than 1,200 consumers by lying about a purported relationship with the federal government and about the amount of fees to be collected for Mission’s services. According to the charges, Mission charged more than $6.6 million in fees to customers and failed to deliver on the promised debt settlement services.
In its civil complaint, the CFPB alleged that the defendants violated the Consumer Financial Protection Act and the Telemarketing and Consumer Fraud and Abuse Prevention Act. According to the complaint, despite telling customers that it would settle their debts for approximately 55 percent of their outstanding credit card balances, Mission instead “often (i) concealed the fact that creditors will not be paid by the time that consumers expect, or might not be paid at all; (ii) charged exorbitant debt-relief services fees often without settling any debts; and (iii) left consumers in worse financial positions than before they enrolled in Mission’s program.” The CFPB alleged that a number of Mission’s customers received little or no debt relief while suffering net losses of between $1,300 and $3,000 per person.
Although the CFPB has become increasingly active over recent months, Cordray’s authority as director remains in limbo. President Obama installed Cordray via a recess appointment on Jan. 4, 2012, but that appointment has been challenged in court on the basis that the Senate was not in recess at the time. Instead, the Senate had been holding pro forma sessions in order to prevent any recess appointments. That litigation remains pending. In a similar case, however, the D.C. Circuit ruled that three members of the National Labor Relations Board (NLRB) were not validly appointed under the Recess Appointments Clause of the Constitution because the Senate was not in recess when President Obama appointed them, and therefore the NLRB lacked a quorum and the authority to make rulings. The Obama administration has filed a petition for a writ of certiorari with the Supreme Court, seeking to have the decision reversed.