CFPB Files "Abusive" Practices Lawsuit Against FL Debt Firm

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The Consumer Financial Protection Bureau (CFPB) this week filed a lawsuit against American Debt Settlement Solutions, Inc., and Michael DiPanni the owner of the Florida company.

Over on Public Citizen's Consumer Law & Policy Blog, Deepak Gupta wrote: In Lawsuit Filed Today, CFPB Rolls Out Its "Abusive" Practices Authority For the First Time
Big news: The CFPB today filed the first lawsuit that invokes the agency's authority under the Dodd-Frank Act to police practices that are not just unfair or deceptive, but "abusive." Observers of the agency have been eagerly anticipating the first use of that authority, which is new to the world of consumer law.

The Bureau's Action

The action targets a Florida debt-relief company alleged to have misled consumers across the country and charged illegal fees for their services.  A Bureau investigation found that American Debt Settlement Solutions, Inc. (ADSS) and its owner Michael DiPanni routinely charged consumers illegal upfront fees for debt-relief services that rarely, if ever, materialized. In total, the CFPB believes that in the course of their illegal conduct, the defendants charged approximately $500,000 in fees to hundreds of consumers in multiple states.

The Bureau alleges that ADSS and DiPanni violated the Federal Trade Commission's Telemarketing Sales Rule (TSR) and the Dodd-Frank Act by charging the illegal up-front fees and making misrepresentations to consumers about their debt-relief services. ADSS deceived consumers by making numerous misrepresentations to lure in consumers who were deeply in debt and in dire circumstances. The upfront fees and the company's failure to provide the promised services often caused consumers to fall further into debt.

In addition, the Bureau believes that the defendants engaged in abusive acts or practices by signing up and charging fees to vulnerable consumers who the defendants knew had inadequate incomes to complete the debt-relief programs in which they were enrolled. More specifically, ADSS is alleged to have:

  •     Misled consumers by falsely promising them it would begin to settle their debts within three to six months when, in reality, services rarely materialized;
  •     Enrolled consumers despite knowing that their income level made it highly unlikely that they could complete the debt-relief programs;
  •     Collected upfront "enrollment" fees from consumers who ADSS knew could not afford the monthly payments required by these debt-relief programs, causing the consumers to spend their last savings on fees for services from which they ultimately would not benefit; and
  •     Failed to settle these consumers' debts within the promised time, forcing many consumers to drop out of the program and forfeit their "enrollment" fees without having received any debt-relief services.
The CFPB says the actions were abusive because consumers reasonably relied on the company to "act in their interest by enrolling them in a debt-relief program that they can be reasonably expected to complete, and which will therefore result in the negotiation, settlement, reduction, or alteration of the terms of their debts."

To follow this case and find additional explanations on CFPB's claims and what's considered "Abusive" read Deepak Gupta's blog in its entirety here:
In Lawsuit Filed Today, CFPB Rolls Out Its "Abusive" Practices Authority For the First Time

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1 Comment

Thank you Denise, Thanks to CFPB!

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