The Consumer Financial Protection Bureau (CFPB) just announced a lawsuit against Performance SLC, Performance Settlement, and CEO Daniel Crenshaw.
As part of that suit, the CFPB also had some strong feelings about settlement companies that draw in consumers with hope of getting an unsecured loan and instead wind up pitched a debt-settlement solution.
The claims made by the CFPB are worth reading to evaluate if a debt relief company you might be involved with has a similar approach.
In this particular lawsuit, the CFPB alleges the company has run afoul of the Consumer Financial Protection Act (CFPA) through “deceptive acts and practices,” and issues surrounding “substantial assistance.”
The CFPB Claims Loan to Settlement Switcheroo
“PSettlement is a consumer debt-settlement company that Crenshaw formed and began operating in 2015. PSettlement charges a fee of 25% of a customer’s enrolled debt to negotiate settlements of the debt.
PSettlement solicits and signs up consumers in multiple states by telephone, using lead referral services to transfer consumer phone calls to PSettlement’s sales staff.
One such lead referral company is OneLoanPlace.com (“OLP”), which has described itself as a “loan matching service” for consumers. OLP is not a lender and does not provide loans itself. As of 2019, based on records of PSettlement’s commission payments to its lead generators, at least 3,000 of PSettlement’s referrals came from OLP.
Under its contract with PSettlement, OLP refers “Qualifying Customers” to PSettlement. “Qualifying Customers” are consumers residing in certain states “with greater than $10,000 in unsecured debt, who have been determined by [OLP] agents to be viable candidates for [PSettlement]’s debt resolution services in [OLP]’s sole discretion.” In return, PSettlement pays OLP a commission calculated as a percentage of any fee that PSettlement collects from a referred consumer who enrolls in PSettlement’s debt resolution program.
One way OLP refers consumers to PSettlement is through an online questionnaire for consumers who are seeking a personal or debt consolidation loan. OLP’s questionnaire asks about the consumer’s credit score, the size of the loan that he or she is seeking, and other financial information. After certain consumers submit the questionnaire, OLP sends them an email stating “we matched you with our partner, Performance” – omitting the “Settlement” part of its name – and giving contact information for OLP and “Performance.” OLP also puts consumers in touch with PSettlement via live call transfers of consumers looking for a loan.
Even though these consumers are seeking loans and PSettlement is not a lender, PSettlement’s sales pitch misleadingly discusses the prospect of a loan.
After a referral by OLP, PSettlement first solicits the consumer to provide his or her personal and financial information by telling the consumer:
We know that the loan process can be a difficult one and I’m glad you called let [sic] me see what we can do for you. So, what I’m going to do is collect as much information as possible and send it over to my underwriting department and they’ll come back on the line with results and let you know what you ultimately may or may not qualify for.
After this introduction, the PSettlement salesperson, referred to as a “debt specialist,” obtains information about the consumer’s debts, income, and any hardship conditions, and obtains the consumer’s permission to pull the consumer’s credit report.
Then the salesperson states that he or she is transferring the consumer to an “underwriter” or “senior underwriter.” The “underwriter” that the salesperson transfers the consumer to is another employee of the sales department. There is no “underwriter” position at PSettlement.
The “underwriter” tells the consumer that PSettlement will “underwrite” the consumer for three options: a loan, a debt-resolution program, or bankruptcy. Neither the “underwriter” nor PSettlement has any training or expertise in bankruptcy, nor does PSettlement provide any bankruptcy services.
The next step is for the “underwriter” to put the consumer on mute for two minutes. After the two minutes, the “underwriter” takes the phone off mute to tell the consumer that the loan was declined:
Ok It looks like we weren’t approved for the loan because the debt to income ratio is too high. I even tried a smaller amount with [OLP] and still was declined, and remember they are like Lending Tree so they shopped this with all the unsecured lenders not just one and unfortunately this is not an option.
PSettlement’s sales scripts contain no instructions for contacting OLP or anyone else to help the consumer obtain a loan. PSettlement’s sales scripts contain no scenario in which the consumer is approved for a loan.
After telling the consumer that he or she was not approved for a loan, the PSettlement “underwriter” then states:
The good news is we did get a PREAPPROVAL for the debt resolution program due to a DTI over 60%. The GREAT news is IF we can get your [sic] approved for this program this is the right fit as the total pay back is roughly 65-75% of what you owe, which would save you thousands and give you the peace of mind that comes with being free of these debts.
The “underwriter” moves on to pitch PSettlement’s services and persuade the consumer to electronically sign PSettlement’s service contract during the phone call. PSettlement uses the consumer’s personal and financial information that it collected as part of the purported loan qualification process to steer them to sign up for PSettlement’s services. PSettlement’s sales scripts also counsel the “underwriter” on how to “educate” the consumer if the consumer continues to press for a loan. 48. Consumers have no way of knowing that PSettlement is not in fact assisting them to obtain a loan during the sales call.
In addition, after telling consumers they were denied for a loan, the “underwriter” tells the consumer about the possibility of a “fresh start” loan from another company that they could “become eligible for” if they sign up for PSettlement’s program and make six consecutive deposits into their trust accounts. PSettlement tells consumers:
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The Fresh Start program is definitely a powerful financial tool, but in order to be eligible to apply with our partner, you need to begin with our Debt Resolution Program first.
PSettlement’s representation, after it has told consumers that they were not approved for a loan, that it was possible for them to become eligible to obtain a loan on the condition that they enrolled in PSettlement’s program and made certain payments, reinforce a reasonable belief by consumers that PSettlement could obtain a loan for them, but only if they first enrolled in PSettlement’s debt-resolution program.
The scripts that contain these representations were in use from at least May 2019. Two versions of the script, dated May 2019 and August 2019 respectively, contain nearly identical language to that quoted above. In addition, it is likely that similar scripts were in use earlier than May 2019, as PSettlement had a marketing arrangement with OLP prior to May 2019 and the two versions of the script were labeled “v.7” and “v.9”, indicating that they were version 7 and version 9 of the same script.
Crenshaw is the controlling owner and CEO of PSettlement. Crenshaw oversees all managers at PSettlement, was involved in creating PSettlement’s policies and procedures, and regularly monitored the company’s sales and customer trust accounts. He opened PSettlement’s bank accounts, is a signatory on the accounts, and approves disbursements from the accounts.
Crenshaw has participated in PSettlement’s sales pitch for leads referred by OLP. He manages PSettlement’s relationships with lead referral services in general and signed PSettlement’s contract with OLP in particular.
Crenshaw has overseen and is aware of the sales scripts and practices of the sales department at PSettlement. He has the authority to make and has made changes to scripts used in connection with leads generated by OLP.
Crenshaw has known or has been recklessly indifferent to the fact that PSettlement’s sales practices include deceiving consumers by pretending to try to help them obtain a personal loan, when in reality PSettlement does nothing to help them obtain a loan at the point of sale or enrollment and instead uses their personal and financial information to steer them to sign up for PSettlement’s services.”