WASHINGTON -Global Client Solutions, a large payment processor, has agreed to pay $7 million to settle charges by the Consumer Financial Protection Bureau that it illegally collected upfront fees from consumers on behalf of debt-settlement companies.
The order issued Monday alleges that Global Client Solutions collected millions of dollars in upfront fees from consumers for hundreds of debt settlement companies nationwide. The Oklahoma company and its two owners have agreed to pay $6 million in relief to affected consumers and a $1 million civil penalty to settle the claims. The consent order is pending approval in federal district court.
"Global Client Solutions made it possible for debt-settlement companies across the country to charge consumers illegal fees," said CFPB Director Richard Cordray. "Consumers struggling to pay off a debt are among the most at risk and deserve better. We will continue to crack down on illegal debt-settlement firms and the companies that help these operations collect illegal fees from consumers."
The CFPB alleges that since October 2010, Global Client Solutions processed "tens of millions of dollars" in illegal upfront fees for "tens of thousands" of consumers - largely in California-- on behalf of roughly 800 debt-relief settlement companies. It is illegal for such companies to take upfront fees before settling any of the consumer's debt. The order claimed that after consumers enrolled in a debt-relief program, they were directed to stop making payments to the debt and instead give monthly payments to Global Client to act as a deposit in a "custodial account" which included the upfront fees. The order also cites the parent company, Global Holdings LLC, and Global Client's two principals, Robert Merrick and Michael Hendrix, who "personally profited" from the activities, the CFPB said.
In addition to the $7 million in relief and penalties Global Client has agreed to pay, the proposed order prohibits it from collecting upfront fees and requires the company to submit periodical compliance reports to the CFPB. The order has been filed in the Court for the Central District of California, where many of Global Client's customers were based.
The order against Global Client is part of a string of enforcement actions that the CFPB has taken against debt-settlement companies. The agency has cited five debt-relief companies and five mortgage-relief providers on similar charges of collecting illegal upfront fees.
"Today's action is part of the CFPB's comprehensive effort to address consumer harm and to root out unlawful practices across the debt settlement industry," the CFPB said in its press release.