District court grants summary judgment against defendant for student loan debt relief
On August 10, the United States District Court for the Central District of California issued summary judgment against an individual defendant in an action brought by the CFPB against a lender and several related persons and companies (collectively, the “Defendants” ) for alleged violations of the Consumer Financial Protection Act (CFPA), Telemarketing Sales Rule (TSR) and Fair Credit Reporting Act (FCRA). As previously covered by InfoBytes, the CFPB filed a lawsuit in 2020 claiming that the defendants violated the FCRA, among other things, by illegally obtaining consumer reports from a credit reporting agency for millions of consumers with loans. students stating that the reports would be used to “make firm credit offers for mortgages” and market mortgage products. However, the Bureau alleged that the defendants instead resold or provided the reports to numerous companies, including companies engaged in the marketing of student debt relief services. The defendants also allegedly violated the TSR by charging and collecting advances for their debt relief services, and violating both the TSR and CFPA by making telemarketing sales calls and sending direct mail to encourage debt relief. consumers to consolidate their loans, while falsely portraying that consolidation could lower student loan interest rates, improve borrower credit scores and allow borrowers to switch providers for the Department of Education. Settlements have already been made with some defendants (covered by InfoBytes here, here and here).
In response to the Bureau’s motion for summary judgment against the individual defendant, the court, among other things, ruled that there was undisputed evidence that the individual defendant “had obtained and subsequently used preselected lists of [a consumer reporting agency] No Purpose Authorized ”to send direct mail solicitations from businesses he controlled to listed consumers, as opposed to outright credit or insurance offers. The court also found that the individual defendant violated the TSR by distorting the material aspects of the debt relief services and violated the CFPA by making false statements to induce consumers to pay advance fees for these services. In addition, the court rejected the individual defendant’s arguments involving the catch-all evidence objections and the Fifth Amendment and statute of limitations claims. Because the individual defendant “was heavily involved in and controlled a large part of the [student loan debt relief businesses’] activities ”, the court concluded that he had acted recklessly and allowed the Bureau’s motion for summary judgment, finding that an injunction, restitution and a civil fine were appropriate remedies.