A payment processing firm has agreed to pay a $1.37 million fine for allegedly helping debt settlement companies collect illegal upfront fees from consumers, federal regulators announced on Thursday.
In addition to the civil penalty, the Consumer Financial Protection Bureau ordered Meracord LLC, a firm based in Tacoma, Wash., and its CEO Linda Remsberg, to stop processing payments for debt-settlement companies and for the mortgage-settlement industry. Meracord must also submit to monitoring and report regularly to regulators.
"By taking a stand against those who facilitate illegal activity, we can root out harmful behavior across the debt-settlement industry and better protect consumers," said the bureau's director, Richard Cordray, in a statement.
Meracord is one of the largest payment processors used by debt-settlement companies, which typically offer to help borrowers negotiate settlements with their creditors.
The firm is accused of violating federal regulations that bar debt-settlement companies from charging upfront fees before settling any of a consumer's debts. The company allegedly processed millions of dollars in upfront fees to 11,000 consumers since Oct. 2010, according to court documents. About 5,000 of those consumers' accounts were closed before any of their debts were settled, the documents say.
As part of the proposed settlement, Meracord does not admit any wrongdoing.
“We are pleased to have this matter concluded so we can focus our resources on providing compliant payment services in the emerging payments and financial technology space, and to resolve the uncertainties inherent in such a review,” said Meracord CEO Remsberg, in a statement. “Compliance with federal and state regulations and commitment to consumer protection remain our number one priority."