October 7, 2015

CFPB Shuts Down Debt Relief Services Company

2 min

On September 15, the CFPB filed suit against the World Law Group, alleging violations of the Consumer Financial Protection Act (CFPA) and the Telemarketing Sales Rule (TSR). On September 2 and 14, the CFPB was granted temporary restraining orders against the World Law Group companies and certain personnel, halting the World Law Group's business operations and freezing its assets, as well as the assets of the named individuals. The restraining orders also appoint a receiver for the business activities of the World Law Group.

The CFPB's complaint, filed in Florida district court, alleges that the World Law Group and several of its officers and directors defrauded customers by advertising services that were never provided.

Specifically, the complaint alleges that the World Law Group charged up-front fees in violation of the TSR. The TSR prohibits companies from charging fees for debt relief services before renegotiating, reducing, settling, or otherwise altering the terms of at least one of the consumer's debts. The CFPB alleges that the World Law Group charged:

  • A $199 "initial fee";
  • An "attorney monthly service fee" of $84.95 per month; and
  • "Bundled legal service fees" ranging from 10 to 15%of the consumer's outstanding debt balance.

The CFPB alleges that these fees were charged within the first few months to a year after the consumer signed up for the World Debt Group's services, regardless of whether any of the consumer's debts were altered.

The CFPB also alleges that the World Debt Group's representations to consumers were false and misleading. The complaint states that the World Debt Group claimed to offer attorney representation, but many of the debt relief services were performed by non-attorneys. Where debt renegotiations failed and the creditor filed suit, the complaint alleges that the World Debt Group's non-attorney employees provided consumers with template filings and encouraged consumers to represent themselves pro se. Consumers were also encouraged to stop making payments on their loans and direct their resources to a single payment to the World Debt Group.

The CFPB alleges consumer harm arising from the World Debt Groups' marketing and other business practices. Additionally, the complaint alleges that at least 21,000 consumers have enrolled in World Law's program since October 27, 2010 and have been charged at least $67 million in up-front fees. The complaint seeks a permanent injunction against the defendants that would enjoin the defendants from harming consumers or violating the TSR. The CFPB also seeks restitution of the alleged illegal fees, as well as civil money penalties.