Yesterday the Consumer Financial Protection Bureau announced an action and settlement against Meracord, previously known as NoteWorld. Meracord was one of the two primary players assisting debt relief companies to collect money from consumers and then pass it on to debt relief companies. Global Client Solutions is the second.
What makes this current episode all seem so silly was the fact Meracord could have avoided much of this grief and angst, along with all the lawsuits they’ve been involved with, if they simply applied a modicum of supervision and clearance of the companies they worked with.
After the implementation of the Telemarketing Sales Rule in 2010, which prohibited debt relief companies from collecting advance fees, it appeared Meracord didn’t learn much from that event and instead switched to servicing advance fee legal model loophole attempting companies.
The action today by the CFPB “would require Meracord and its CEO and owner, Linda Remsberg, to halt all illegal activities and to pay a $1.376 million civil penalty.”
“Today we are taking action against Meracord, a company that made it possible for debt-settlement companies across the country to charge consumers illegal fees,” said CFPB Director Richard Cordray. “By taking a stand against those who facilitate illegal activity, we can root out harmful behavior across the debt-settlement industry and better protect consumers.”
Debt-settlement companies generally offer to help consumers reduce or eliminate their credit card or other debt by negotiating settlements with creditors. In many cases, when consumers enroll in a debt-settlement program, the company instructs them to stop paying their debts and to instead make monthly payments to a payment processor, such as Meracord, while the debts are negotiated. Meracord, which is based in the state of Washington, has been one of the largest payment processors for the debt-settlement industry.
The CFPB charges that Meracord and Remsberg violated the Telemarketing Sales Rule by helping debt-settlement companies charge consumers upfront fees. The rule prohibits debt-settlement companies from charging consumers such fees before settling any of their debts. The rule protects consumers from the risk of spending money on services that may not materialize and then ultimately being left even deeper in debt.
According to the CFPB’s complaint, Meracord processed thousands of these illegal advance fees since October 2010. In total, the CFPB believes that Meracord helped debt-settlement companies charge millions of dollars in unlawful fees to more than 11,000 consumers in multiple states. Nearly 5,000 of those consumers’ accounts were closed without any of their debts being settled.
Today’s proposed order, which the defendants have agreed to, would bar Meracord and Remsberg from processing payments for debt-settlement companies and for members of the related mortgage-settlement industry. The defendants would be subject to monitoring by the CFPB and would be required to make reports to the CFPB to ensure their compliance. The defendants would also have to pay a civil money penalty of $1.376 million.
By pursuing this action against Meracord as a centralized chokepoint, the CFPB can efficiently and effectively help consumers who were charged millions of dollars in illegal fees by many of the debt-settlement companies using Meracord’s services. The Bureau is working to ensure federal consumer financial laws are being followed at every stage of the process, including by taking action against those who unlawfully facilitate the wrongful conduct of others.
This action is part of the CFPB’s comprehensive effort to prevent consumer harm in the debt-settlement industry. In the lead up to this case, the Bureau has been pursuing actions against several debt-settlement providers that charged consumers illegal advance fees with Meracord’s assistance. The Bureau obtained judgments against two of these companies – Payday Loan Debt Solution, Inc. and American Debt Settlement Solutions, Inc. The Bureau also filed a complaint against four others – Mission Settlement Agency, the Law Office of Michael Levitis, Premier Consulting Group, LLC, and the Law Office of Michael Lupolover. – Source
Companies that utilized the services of Meracord, roughly 250, should be worried. As the complaint states, “Account records obtained from Meracord demonstrate that many of the DRSPs for which it processed payments routinely charged advance fees for debt-relief services in violation of the TSR. According to those same records, since October 27, 2010, Meracord processed 6 payments for more than 11,000 consumers who were charged one or more fees for debt-relief 7 services before any of their debts were actually settled; 4,922 of those consumers’ accounts were 8 closed without any of their debts being settled.” – Source
The CFPB complaint states the position Meracord should have known better than to participate in consumer transactions. “At the time Meracord transmitted these fees, it knew, based on its own account records, that it had not yet transmitted funds from the consumer’s account to one of his or her creditors. Meracord thus knew that it was transmitting advance fees to DRSPs that had not yet settled consumers’ debts and that were not entitled to advance fees.”