The CFPB recently filed a lawsuit in the Central District of California against Texas-based GST Factoring Inc. and two of its owners, as well as Champion Marketing Solutions, LLC (“CMS”), its owner and four separate attorneys.
In its complaint, the CFPB alleged that the defendants had violated the Telemarketing Rule (TSR) rule ban on receiving advances for debt relief services sold through telemarketing. As of 2015, “main generators”, working for GST and trained by CMS, are alleged to have engaged in telemarketing for the attorneys named as defendants. Although they assured clients that they would only engage with a lawyer, the complaint states that fees (some up to 40% of a client’s unpaid loan amount) were “billed immediately by arrangement.[ed] monthly payments ”and went directly to GST Factoring, who then allocated the costs among the defendants. The scheme allegedly enabled defendants to collect prohibited charges from some 2,600 clients, totaling $ 11.8 million in just under five years.
Along with the filing of the complaint, the CFPB filed proposals for final stipulated judgments against four people named as defendants – three lawyers and one of the owners of GST Factoring. If delivered, the judgments will require these defendants to pay a total of approximately $ 81,600 in restitution to affected consumers as well as a civil fine of $ 1 to the CFPB Civil Sanctions Fund. The terms of settlement continue a tendency for the CFPB to accept settlements in which the amount payable by the defendant is significantly less than the amount allegedly wrongly received by the defendant. CFPB c. Tinemark Solutions Inc., et al. (Case no. 9: 20-cv-81057) (SD Fla.) (Asking the court to reduce a judgment from $ 3.8 million to $ 22,000); CFPB c. Chou Team Realty LLC et al., (Case 8: 20-cv-00043) (CD Cal.) (Parties jointly seek court approval to reduce the previously concluded $ 7 million settlement agreement to $ 25,000).
Assuming the court accepts these proposed settlements, the CFPB lawsuit would continue against the two entities, as well as the remaining owner of GST Factoring, Rick Graff, CMS owner Scott Freda, and California lawyer Amanda Johnson. The complaint seeks redress from the consumer, an injunction and civil penalties.