The Consumer Financial Protection Bureau (CFPB) and SettleIt, Inc., an online debt-settlement company, have agreed to settle “abusiveness” claims for $1.4 million.

In an April 13 complaint filed in a California federal court, the CFPB detailed SettleIt’s business practices and alleged SettleIt concealed information from its customers. SettleIt negotiates with creditors to reduce and settle consumers’ debts. Customers seeking debt help sign an agreement with SettleIt, and SettleIt promises to advocate for the customers and relieve their debts.

The CFPB alleged SettleIt routinely conceals three things from its customers:

1. SettleIt buries its fee — a whopping 25% of the debt customers ask SettleIt to handle — in a 19-page customer contract. In some cases, SettleIt also charges the fee before a customer has approved a debt settlement.

2. SettleIt tells its customers it is “not owned or operated by any of your creditors,” but the same individual who owns SettleIt owns two consumer lenders — CashCall, Inc. and LoanMe, Inc. SettleIt settles debts for consumers with CashCall and LoanMe, and does so at higher rates than debts owed to other lenders.

3. SettleIt encourages its customers to stop borrowing money, while also marketing loans to them. These “Fresh Start” loans come from various lenders, including CashCall and LoanMe, whose loans have a 24% APR. The loans are used to pay SettleIt’s fee, resulting in customers paying interest on the loans to pay SettleIt. SettleIt does not disclose its relationship with CashCall and LoanMe to its customers.

Based on these allegations, the CFPB lodged four claims against SettleIt. One claim is an alleged violation of the Dodd-Frank Act’s prohibition on “unfair, deceptive, or abusive acts or practices,” known as UDAAP. See 12 U.S.C. § 5531(a). Specifically, the CFPB asserted SettleIt engaged in “abusive””practices by taking “unreasonable advantage of consumers’ reasonable reliance that SettleIt would protect their interests in negotiating their debts by engaging in a form of self-dealing that benefitted SettleIt, CashCall, and LoanMe at consumers’ expense.”

The day after the complaint was filed, the parties filed a stipulated settlement. Without admitting the CFPB’s allegations, SettleIt agreed to stop settling debts owed to CashCall and LoanMe and clearly disclose its fees and only charge them after customer authorization. SettleIt also agreed to repay consumers $647,000 for fees received for settling CashCall or LoanMe debts and to pay the CFPB a $750,000 fine.

The SettleIt case represents an important step in the CFPB filing targeted “abusiveness” allegations. As we recently reported, the CFPB under President Biden rescinded the Trump-era policy statement limiting the “abusive acts and practices” standard of the 2010 Dodd-Frank Act. That policy statement indicated the CFPB would avoid filing duplicative claims against companies arising under more than one of the Dodd-Frank Act’s UDAAP standards targeting “unfair,” “deceptive,” and “abusive” acts and practices.

While the CFPB has walked back that limitation under President Biden, allowing the agency to file multiple claims based on the same practices, the SettleIt case reveals that the CFPB is taking a new interest in “abusive” claims in their own right.

The SettleIt suit, like the CFPB’s recent suit against immigration bond company Libre, signals a new wave of aggressive enforcement of the UDAAP standards. Previously muddled with allegations of “unfair” and “deceptive” practices, allegations of singularly “abusive” acts seem to be more commonplace under the new CFPB leadership. We will continue to monitor this development.