CFPB sues California debt-settlement firms, owner over alleged illegal advance fees

The Consumer Financial Protection Bureau filed a lawsuit in California federal court last week against Performance SLC LLC, Performance Settlement and Daniel Crenshaw, alleging illegal advance fees, disclosure violations and deceptive practices tied to debt-relief services for student loan borrowers.

The bureau says the companies charged fees before borrowers received any debt relief and used marketing that misled consumers about loan options. The complaint also seeks redress for consumers, injunctive relief and civil money penalties.

According to the bureau’s complaint, Performance SLC is a debt-settlement company focused on federal student loan debt, while Performance Settlement also provides debt-settlement services. The CFPB says Crenshaw is the owner and chief executive of both companies.

The bureau alleges the companies violated the Telemarketing Sales Rule by charging illegal advance fees to borrowers seeking loan consolidation, loan forgiveness or income-driven repayment plans for federal student loans. The source says the rule bars a company from requesting or receiving fees for telemarketed debt-relief services before debt terms are altered or settled and before the consumer makes at least one payment under the new arrangement, citing 16 C.F.R. § 310.4(a)(5)(i).

The complaint says Performance SLC charged fees at or just after enrollment, before debt terms were altered. It also alleges Crenshaw arranged trust accounts used to receive those advance fees and substantially assisted Performance SLC’s alleged rule violations.

The bureau further alleges disclosure violations under the Telemarketing Sales Rule. It says Performance SLC did not clearly and conspicuously tell customers that they owned the money in their trust accounts, that they could withdraw funds at any time without penalty, and that customers who withdrew or canceled service should receive all funds in the accounts other than earned fees, citing 16 C.F.R. § 310.3(a)(1)(viii)(D).

The CFPB also alleges that Performance Settlement and Crenshaw violated the Consumer Financial Protection Act by engaging in deceptive acts or practices. The complaint says Performance Settlement told consumers that it had considered and rejected them for personal loans, even though it did not make loans, as a way to persuade them to sign up for debt-settlement services.

In addition, the bureau alleges Crenshaw directly took part in the deceptive conduct through his role in developing and approving marketing materials, and that he substantially assisted Performance Settlement’s alleged CFPA violations.

The complaint seeks consumer redress, injunctive relief and civil money penalties against all three defendants. The source does not say how the defendants have responded.

What happens next will depend on the federal court case. The bureau’s requested remedies would need to be decided by the court if the case proceeds.

Sources

• Consumer Finance Monitor article

Editorial note: This article was prepared with AI assistance and includes source attribution for reader review.