CFPB Settles With Affiliates of Debt Settlement Company For $107 Million

The Consumer Financial Protection Bureau (CFPB) reached a proposed $107 million settlement on Tuesday with several individuals affiliated with the World Law Group. According to the Bureau, defendants Derin Scott, David Klein, and Shannon Scott “received, directly or indirectly, funds or other assets” from World Law Group customers, after the debt settlement company collected millions in up-front fees from consumers for “legal services” and then did little to help those consumers.

This proposed settlement follows the Bureau’s request for a Florida federal court to issue a default judgment against several affiliates of the World Law Group earlier this month. The CFPB asked the U.S. District Court of the Southern District of Florida to issue a judgment against Orion Processing LLC, Family Capital Investment & Management LLC, World Law Debt Services LLC, and World Law Processing LLC after alleging that the group collectively scammed consumers out of millions of dollars.

The $107 million settlement is substantial, but it’s a decrease from the $147 million the Bureau was requesting in penalties against the World Law Group. Furthermore, it’s not clear that the defendants will actually be able to pay the full amount of the settlement, so the monetary judgment will be suspended if the defendants meet the various conditions of the settlement. One such condition is that as part of the settlement, the defendants are granting the CFPB the rights to any frozen assets, including a building in Austin, Texas, a variety of bank and credit union accounts, and vehicles such as a 2007 Mercedes Benz, several boats and some jet skis, a series of ATVs, racing bikes, and a 2012 Husqvarna Zero Turn Lawn Mower. Whether these assets will ultimately be worth the full $107 million judgment is still in question.

The case was initially brought by the CFPB in August 2015, after the Bureau alleged that the group violated the FTC’s Telemarketing Sales Rule (TSR) and UDAAP under Dodd-Frank by charging at least $67 million in illegal up-front fees and promising legal representation without intending to deliver such representation.

At the time the suit was filed, CFPB Director Richard Cordray criticized World Law Group by saying they “lured consumers with false promises of help from lawyers and collected millions in illegal upfront fees.”

As insideARM reported earlier this month, when the Bureau asked the District Court for a default judgment they referred to the World Law Group’s “blatant violations of federal law, their bad faith conduct, and the significant harm resulting from their illegal activity,” saying the “gravity of this scheme was tremendous” and that the company “targeted financially-distressed consumers who were struggling to pay their bills” and “bilked these consumers” out of their money. The CFPB added that prior to this settlement that World Law Group “failed to participate in the litigation in good faith.”

insideARM Perspective

insideARM applauds the CFPB for pursuing this matter. There are many legitimate debt settlement and debt relief companies, but there are also many other companies that engage in the conduct alleged in this case. These companies promise to eliminate a consumer’s debt balance, but in reality they are only in business to collect upfront fees.

It is difficult to turn on a radio or go online without hearing or seeing an ad promoting such “services.” With taglines like “you have the absolute right to settle your accounts” or “the Obama administration has recently passed laws making it your absolute right to settle your debts,” the slick marketing campaigns work. The numbers involved in the above case prove that consumers believe the advertising.

insideARM suggests that consumers thinking about debt settlement go to www.ftc.gov and search for “Debt Relief Services” before consulting with any debt settlement or debt relief company.