On May 14, the Consumer Financial Protection Bureau reached an $18 million settlement with mortgage lender Monster Loans (a/k/a Chou Team Realty LLC) and several individual, related entities to resolve allegations that they impermissibly and duplicitously obtained credit reports for their associated student loan debt-relief companies, which, in turn, used the consumer reports to deceptively market their services nationwide and then charged consumers illegal fees – all in violation of the of the Fair Credit Reporting Act, the Consumer Financial Protection Act of 2010 (“CFPA”), and the Telemarketing Sales Rule (“TSR”).
The CFPB commenced a civil action on January 9, 2020, claiming that Monster Loans and several individuals and related companies, including Lend Tech Loans (“Lend Tech”), Thomas Chou, and Sean Cowell, ran a scheme to obtain consumer reports on individuals with student loans by falsely representing that the information would be used to make firm offers of credit for mortgage loans. The CFPB expressly stated in its complaint that student debt relief marketing “is not a permissible purpose” under the FCRA.
The matter is pending in the United States District Court for the Central District of California and captioned: CFPB v. Chou Team Realty LLC, et al., No. 8:20-cv-00043. A copy of the complaint can be found here. The proposed settlement, if entered by the court, would impose an $18 million redress judgment against Monster Loans; ban Monster Loans, Chou, and Cowell from the debt-relief industry; and impose a total $450,001 civil money penalty against them.
Monster Loans allegedly obtained reports on approximately 7 million student loan debtors from December 2015 to May 2017. Then, through Lend Tech, Chou and Cowell obtained reports on over 12.5 million more debtors through at least January 2019. After obtaining the reports, Monsters Loans and Lend Tech would transfer them to a student debt-relief company called TDK Enterprises, which allegedly would then reach out to the student-loan debtors with mailings and telemarketing calls – some of which, the CFPB claimed, included misrepresentations about available relief and applicable services. The CFPB further alleged that, with Monster Loans’ assistance, the student loan debt-relief companies violated the CFPA and the TSR by making several deceptive representations about the companies’ services and violated the TSR by unlawfully collecting advance fees for debt relief services.
Chou and Cowell were alleged to be the leaders of the scheme. They were the officers of Monster Loans, investors in the student loan debt-relief companies, and allegedly helped create the sham entity Lend Tech. The CFPB claimed that they participated in the FCRA violations and received purported profits from the student loan debt-relief companies. In total, the named defendants were alleged to have collected over $15 million in illegal fees from the scheme.
The proposed settlement order will impose a judgment for redress of $18 million against Monster Loans. Full payment will be suspended subject to Monster Loans’ payment of $200,000 for consumer redress. The settlement also will require Chou and his company to disgorge $403,750 in profits for the purpose of providing redress and will impose a judgment for redress of $406,150 against Cowell and his company, which will be suspended. These suspended amounts account for certain of these defendants’ limited ability to pay more based on sworn financial statements. Monster Loans will pay a $1 civil penalty as part of the settlement, based on its documented inability to pay; Chou will pay a $350,000 penalty; and Cowell will pay a $100,000 penalty.
The CFPB’s claims against the other defendants and relief defendants in this action, including Lend Tech, remain unresolved and pending with the court.