Debt settlement firms that require upfront payments continue to find themselves in the cross-hairs of the Consumer Financial Protection Bureau. On Thursday, the agency announced it filed a complaint against a Washington state payment processor, Meracord LLC, alleging it provides the financial structure that enables collection of illegal upfront fees from consumers drowning in debt.
Consumers who use debt settlement companies are often instructed to stop paying debtors as part of a negotiation strategy. In the meantime, they are told to make payments to a third-party firm, allegedly to build a pile of cash that can be used to make settlement offers. With fraudulent firms, consumers have complained that debts ultimately aren’t settled, and the funds they’ve paid to the third-party firms are lost to fees.
Meracord, the CFPB said, collected “millions of dollars” in such funds on behalf of debt settlement companies from 11,000 consumers since October 2010. Nearly 5,000 of those customers got nothing for their money — none of their debts were actually settled, the agency alleges.