You Didn’t Need to be Psychic to See That Coming – DMB Financial

Not long ago I wrote about a debt relief company, DMB Financial that sued the Consumer Financial Protection Bureau (CFPB) in what looked like an effort to get out from under an investigation. See this post.

Well, a few minutes ago, I was notified the CFPB went ahead and sued them.

The CFPB said, “Today, the Consumer Financial Protection Bureau (Bureau) filed a lawsuit against DMB Financial, LLC (DMB). The Bureau alleges that DMB violated the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act of 2010 (CFPA) in connection with its debt-settlement and debt-relief services. DMB, which has its principal place of business in Beverly, Massachusetts, offers to renegotiate, settle, or otherwise alter the terms of unsecured debts owed by consumers to creditors or debt collectors. The Bureau’s complaint, filed in the United States District Court for the District of Massachusetts, seeks an injunction, as well as redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties.

The Bureau alleges that DMB engaged in abusive and deceptive acts or practices in violation of the TSR. These allegedly unlawful activities include requesting and receiving fees before it performed its promised services and before consumers started payments under any debt settlement. The Bureau also alleges that, after settling individual debts, DMB collected fees based on increased debt amounts after enrollment rather than the amount of each debt at the time of enrollment.

The Bureau alleges that DMB failed to disclose to consumers before enrollment when it would make a settlement offer to creditors or debt collectors. In addition, the Bureau alleges that DMB did not disclose the amount of money or the percentage of each outstanding debt the consumer had to accumulate before DMB would make a settlement offer. The Bureau alleges that DMB’s alleged TSR violations also constitute violations of the CFPA. The Bureau further alleges that DMB misrepresented to consumers that it would not charge fees for its services until after it settled a debt and consumers made a payment under the settlement. The Bureau also alleges that DMB misrepresented in its contracts the debt amount that it would use to determine its fees.

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The complaint is not a finding or ruling that the defendant has violated the law.

Some Observations

I did notice that the suit does not list the owners or employees. That’s different. It appears the CFPB is going after just the company.

The complaint filed says, “Since at least 2012, DMB has offered two debt-settlement programs: the Financial Liberty Program (Liberty Program) and the Financial Independence Program (Independence Program). The only difference between the programs is how DMB structures the fee charged to consumers. Consumers enrolled in the Liberty Program pay DMB a settlement fee that is a percentage of the consumer’s debt balance. Consumers enrolled in the Independence Program pay DMB a settlement fee that is a percentage of what consumers saved as a result of any debt settlement that DMB secures for consumers.”

The DMB fee model seems like it was TSR compliant by the CFPB statement, “Since at least 2012, the Liberty and Independence Enrollment Agreements have stated: “The Client agrees to pay the Company a fee . . . on each given account negotiated and settled under the Program. . . . Once Client receives an offer from any creditor enrolled in program, accepts and makes first payment toward settlement, Company is entitled to receive its full fee proportional to debt enrolled.”

However, the CFPB goes on to say, “In two scenarios, DMB charged consumers its fee contrary to the terms of its enrollment agreements: (1) DMB charged some consumers its fee when DMB had not successfully settled consumers’ debts; and (2) DMB charged some consumers its fee before consumers had made a first payment toward settlement.”

This statement from the CFPB, if found to be true, seems like something to avoid. The CFPB states, “DMB requested or received fees from at least hundreds of consumers when a creditor, in the absence of a binding settlement, stopped collecting from a consumer, sometimes following a charge-off. In such circumstances, the consumer had not executed a settlement agreement and had made no settlement payment to the creditor or any debt collector before DMB charged its fee. These consumers could still be subject to collection efforts, including real or threatened litigation, and their credit reports could continue to reflect an unpaid or delinquent debt in the trade line for that creditor. DMB did not disclose to consumers that it would charge its fee under these circumstances, and consumers did not agree when they enrolled in DMB’s programs to pay fees in these circumstances.”

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And then we will have to figure out why DMB Financial allegedly did this, “DMB requested or received fees from thousands of consumers even though the consumers had not yet made at least one payment under a settlement agreement, debt- management plan, or other valid contractual agreement. DMB did not disclose to consumers that it would charge its fee in this circumstance, and consumers did not agree when they enrolled in DMB’s programs to pay fees in this circumstance.”

You can read the full complaint below.

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