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CFPB: SettleIt Leaves Consumers Unsettled

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CFPB: SettleIt Leaves Consumers Unsettled

The Consumer Financial Protection Bureau (CFPB) yesterday filed a complaint in federal district court alleging SettleIt, Inc., of “steering consumers into high-cost loans.” The complaint takes SettleIt to task for “self-dealing,” steering unwitting consumers into loans with its affiliated companies.

The American Financial Services Association has long advocated against predatory practices and players, such as “debt settlement companies,” because of the distrust and uncertainty such business practices create among consumers who truly need financial assistance.

Danielle Fagre Arlowe, Senior Vice President with AFSA testified in 2020 before the CFPB on the myriad problems the “debt settlement” industry presents. “These shady companies encourage delinquency and often leave consumers worse off than they were before,” Arlowe said. “If consumers are facing problems paying their loans, the first step should always be to contact their lender. Our members have a vested interest in working with their customers.”

“Debt settlement companies” typically operate outside of federal and state requirements traditional lenders, such as banks and installment lenders, follow. This often leads to financial harm to the consumers. For example, predatory “debt settlement companies” typically encourage consumers to cease payment on outstanding loans, while not disclosing that such actions will damage consumers’ credit scores and trigger collection processes.

AFSA, consumer-advocacy organizations, and federal regulators, such as the CFPB and Federal Trade Commission, have long expressed concerns about the schemes presented as solutions by debt settlement companies. This recent action reinforces several important points.

First, consumers need access to secure and reliable credit options. Second, just as important, consumers must be empowered to make sound financial decisions, understanding their choices in the credit marketplace. Third, collaborative engagement among policymakers, the consumer credit industry, and consumers, serves everyone well, which is the approach AFSA hopes is taken in shaping additional rules of the road in the debt settlement space.

April 15th, 2021 by