BALTIMORE (CN) — The Consumer Financial Protection Bureau brought a federal complaint Thursday against two debt-relief companies operating under the name FDAA that they say posed as the federal government.
Short for Federal Debt Assistance Association and Financial Document Assistance Administration, the two Baltimore companies allegedly promised falsely that they can improve poor credit scores.
The CFPB says the companies wanted thousands of dollars upfront in exchange for their services, offering bad advice to the financially vulnerable consumers they targeted on how to come up with money: max out your credit cards.
“In the end,” the complaint states, “defendants’ programs increased consumers’ debts, hurt their credit scores, and, in some instances, exposed them to creditors’ lawsuits.”
In addition to the two FDAA companies, the complaint in U.S. District Court for the District of Maryland takes aim at Clear Solutions Inc.
Also headquartered in Baltimore, Clear Solutions allegedly processed consumer payments for the FDAA companies and provided other services.
Regulators say the FDAA companies claimed falsely that they offered “debt-validation” programs approved by the Federal Trade Commission.
These programs were in fact “merely debt-management programs that misled consumers about the results that could be achieved under the FDCPA’s debt-verification process,” according to the complaint, abbreviating the Fair Debt Collection Practices Act.
The CFPB’s lawsuit seeks to end these deceptive practices, obtain redress for harmed consumers, and impose civil money penalties.
“FDAA and its owners lied to financially vulnerable consumers to line their pockets with cash,” CFPB Director Richard Cordray said in a statement. “Today’s lawsuit seeks to stop these deceptive practices, impose civil money penalties, and return to cheated consumers the fees they paid to these companies.”
Vincent Piccione, David Piccione and Robert Pantoulis — three men that the CFPB says either own or owned the FDAA companies and Clear Solutions — are named as co-defendants to the case.
Under federal law, when a debt has been timely disputed, the debt collector must cease collection until it can obtain verification of the debt. But the FDAA companies allegedly told consumers that the money owed would be eliminated or reduced if the creditor did not respond to their satisfaction.
Regulators say these practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule.
Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions and individuals violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices.