CFPB Begins Largest-Ever Distribution to Victims in ‘Advance Fee’ Case

The Consumer Financial Protection Bureau (CFPB) has begun distributing $1.8 billion to 4.3 million consumers a year after securing a legal judgment saying that companies had violated the Telemarketing Sales Rule’s advance fee prohibition.

These payments to the victims make up the largest-ever distribution from the CFPB’s victims relief fund, the regulator said in a Thursday (Dec. 5) press release.

“This historic distribution of $1.8 billion demonstrates the CFPB’s commitment to making consumers whole, even when the companies that harm them shut down or declare bankruptcy,” CFPB Director Rohit Chopra said in the release.

The CFPB secured the legal judgment against a group of credit repair companies that includes Lexington Law and CreditRepair.com in August 2023, and the companies filed for bankruptcy after that ruling, according to the release.

The regulator had sued the companies in 2019 and won a court victory in March 2023 when a judge found the companies had violated the advance fee provision, PYMNTS reported in August 2023.

“Under federal law, credit repair companies that engage in telemarketing cannot collect fees until they provide documentation showing they have achieved the promised results for consumers, at least six months after the results were achieved,” the Thursday press release said.

Since the launch of the CFPB in 2011, the regulator has distributed over $3.3 billion through the victims relief fund, which is financed by civil penalty payments, per the release.

In this case, the payments to victims are being administered by JND Legal Administration, according to the release.

This news came on the heels of two other, separate actions involving advance fees.

On Wednesday (Dec. 4), the regulator filed a proposed stipulated judgment and order asking a court to permanently ban Student Loan Pro and its owner, Judith Noh, from offering or providing consumer financial products, alleging that they violated federal law by requesting and receiving advance fees for debt-relief services.

In August, the CFPB said it was seeking a $2 million civil penalty against Credit Repair Cloud CEO Daniel A. Rosen and a $1 million civil penalty against his company to resolve the regulator’s lawsuit alleging that they helped companies charge illegal advance fees to consumers.

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