On May 7, 2013, the Consumer Financial Protection Bureau (“CFPB”) announced the first criminal prosecution of a debt-relief service provider that arose specifically from an investigation conducted by the CFPB. Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the CFPB was created to supervise banks, credit unions and other financial companies, such as debt-relief service providers and consumer credit reporting firms, and to enforce federal consumer financial laws. Included among the CFPB’s regulatory powers is the ability to audit the companies it regulates and, as with other federal agencies, to refer cases to federal authorities for criminal prosecution. In this instance, the service provider is accused of inappropriately obtaining more than $1.3 million in fees, among other violations of law. The CFPB filed a civil action against the service provider, and referred the matter to the US Attorney for the Southern District of New York for criminal prosecution.
As many debt-relief service providers are aware, the CFPB has been increasing the frequency of its audits. Consequently, industry observers do not believe that this referral for criminal prosecution is an isolated incident. Rather, it is being viewed as evidence that the CFPB is willing to aggressively utilize its full regulatory authority if it believes serious violations have occurred, whereas other federal agencies have historically limited their enforcement actions to civil and administrative proceedings.
To view the official press release, click here