The Consumer Financial Protection Bureau on Thursday fined Meracord, a payment processor, for helping collect illegal debt-settlement fees.

Washington state-based Meracord and its chief executive, Linda Remsberg, agreed to pay a $1.376 million penalty and are barred from processing payments for debt-settlement companies, the bureau said. Meracord helped collect upfront fees from borrowers, according to the bureau's complaint, even though settlement firms are not allowed to charge such fees before actually eliminating or reducing consumers' debts.

"By pursuing this action against Meracord as a centralized choke point, the CFPB can efficiently and effectively help consumers who were charged millions of dollars in illegal fees by many of the debt-settlement companies using Meracord's services," the bureau said in a statement.

Meracord, one of the largest payment processors for debt-settlement firms, neither admitted nor denied the allegations.

The CFPB said Meracord had processed thousands of illegal upfront fees since 2010, resulting in millions of dollars in charges to about 11,000 consumers. It reported nearly 5,000 of those people had none of their debts settled.

The CFPB reported that debt-settlement companies, which negotiate with creditors to help borrowers reduce credit card or other debt, often use outside processing companies to collect payments from consumers. Officials have said firms may deceive consumers, often do not ever eliminate their clients' debts, and can charge hefty fees.

Consumer regulators obtained court judgments in the past year against two companies that Meracord worked with and filed a complaint against four others, the bureau said.

"We believe it is important to hold primary violators of the law...accountable. But through these cases we have also been building our action against Meracord, whose assistance made these violations possible," said Steve Antonakes, the bureau's deputy director.

Antonakes said bureau officials believe Meracord should have known it was improperly collecting upfront fees for debt settlement firms that had provided no benefit to the consumers. He said the bureau expects to provide restitution to harmed borrowers.

The bureau filed its proposed court order, which is subject to a judge's approval, with the U.S. district court for the Western District of Washington.

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