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CFPB Takes Action Against Meracord for Processing Illegal Debt-Settlement Fees

Payment Processor to Pay $1.376 Million for Aiding Illegal Practices by Debt-Settlement Companies

WASHINGTON, D.C. – Today, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against Meracord LLC, a leading debt-settlement payment processor, for allegedly helping others to collect millions of dollars in illegal upfront fees from consumers. The Bureau has asked a federal district court to approve a consent order that 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.

The Bureau files a complaint when it has reason to believe that the law has been or is being violated, and it appears to the Bureau that an enforcement action is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. The proposed court order has been filed with the United States District Court for the Western District of Washington and will have the full force of law only when signed by the presiding judge.

A copy of today’s complaint is available at: http://files.consumerfinance.gov/f/201310_CFPB_meracord-complaint.pdf

A copy of the proposed court order is available at: http://files.consumerfinance.gov/f/201310_cfpb_meracord-proposed-stipulated-final-judgment-and-consent-order.pdf

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The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.

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