On May 1, 2013, federal prosecutors in the Southern District of New York brought the first criminal case based on a referral from the Consumer Finance Protection Bureau (CFPB) in United States v. Mission Settlement Agency. In the recently unsealed indictment, federal authorities charge Mission Settlement Agency (Mission) and four of its employees—including Mission’s principal, who is a suspended attorney—with mail and wire fraud in connection with an alleged scheme to defraud customers seeking “debt settlement” services. This case is significant because prior to this action, the CFPB efforts were confined to civil and administrative enforcement remedies.
According to the indictment, Mission held itself out as being able to lower its customer’s consumer debt by 45 percent, for a nominal fee, through negotiation with credit card companies and banks. Mission marketed its services to financially disadvantaged individuals known to be struggling with credit card debt. However, as the indictment alleges, instead of helping its customers, it “systematically exploited and defrauded” customers by failing to reduce their debts and by charging excessive fees. The indictment alleges the company took fees of $2.2 million from 1,200 customers without paying any money to their creditors.
In prepared remarks in conjunction with the announcement of this indictment, CFPB Director Richard Cordray explained that the indictment stemmed from a CFPB investigation: “During our investigation, we found evidence of criminal conduct and, accordingly, we referred this information to the United States Attorney for the Southern District of New York while we continued to pursue the civil law violations. Partnerships like the one between the Consumer Bureau and the Department of Justice are integral to our success and mission.” Cordray also made clear the CFPB would be looking to make similar referrals in the future: “We will be looking for more such occasions to coordinate and collaborate [with the Department of Justice].”
The CFPB was established in 2010 by the Dodd-Frank Wall Street Reform and Consumer Protection Act. It is authorized to regulate and supervise certain consumer financial services companies and large depository institutions. Prior to Mission Settlement Agency, the CFPB’s enforcement actions typically resulted in orders that the company in question cease and desist deceptive and misleading conduct, refund customers for their losses and pay a civil penalty. This case sends a clear message that the CFPB will have an emphasis on enforcement, and not just supervision, and referrals for criminal prosecution, when warranted, should be expected.
- Richard Cordray’s Prepared Remarks from May 7, 2013
- U.S. Dept. of Justice Press Release regarding the Mission Settlement Agency Indictment
- U.S. v. Mission Settlement Agency et al. Indictment
- U.S. v. Felix Lemberskiy Information
- U.S. v. Zakhir Shirinov Information
- U.S. v. Mission Settlement Agency, et al. Forfeiture Complaint