Government agencies filed twin charges against debt-relief companies for fraud and deception on Tuesday, the first suit of its kind.
The Consumer Financial Protection Bureau (CFPB) filed civil complaints against two firms that claimed to lower customers' overall debt by negotiating with banks and credit card companies for charging consumers illegal fees. Separately, the Department of Justice (DOJ) filed criminal charges against one of the companies for mail and wire fraud.
The Justice Department charged New York-based Mission Settlement Agency, its owner and three employees with defrauding more than 1,200 people for millions of dollars. The department claims that from 2009 through May 2013, the company lied about its fees and falsely claimed to be affiliated with the federal government to trick consumers into paying for its services, resulting in $2.2 million in fees for the company while ignoring its customers.
The agency's owner used the profits to run a Brooklyn nightclub, lease two luxury cars and pay for his mother's credit card bills, the Justice Department alleges.