August 15, 2022

Volume XII, Number 227

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August 12, 2022

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CFPB Takes Action Against Purchaser of Structured Settlements

On December 17, the CFPB filed a proposed stipulated final judgment and order against a limited liability company, its principals, and an attorney who allegedly provided advisory services to consumers who sold structured settlements to the company.   The CFPB alleged that the company steered consumers to consider signing away future structured settlement payments for lump-sum payments, and to receive “independent advice” from an attorney who was paid directly by the company who indicated to consumers that the transactions required very little scrutiny.

The CFPB’s original complaint filed in 2016 alleged that the attorney’s conduct was unfair, abusive, and deceptive in violation of the CFPA for, among other things, failing to disclose his relationship with the company.  The complaint also claimed that the company and its principals engaged in abusive conduct for encouraging consumers to take advances on their structured settlements and falsely representing that the consumers were obligated to complete the structured settlement sale, “even if they [later] realized it was not in their best interest.”

On November 18, the U.S. District Court for the District of Maryland separately entered a judgment against the attorney, which required that the attorney pay $40,000 in disgorgement and a $10,000 civil money penalty.  Under the terms of the proposed settlement, the remaining defendants would be permanently banned from referring consumers to individuals and entities offering advice on structured settlement transactions and are ordered to pay $40,000 in disgorgement and a $10,000 civil money penalty.

Putting It Into Practice:  Cash advance businesses engaging in merchant cash advance transactions, income share agreements, litigation funding advances, and structured settlement advances have received significant attention over the years from federal and state regulators.  As this trend continues, these companies should be mindful of the CFPB’s involvement in this space through its UDAAP authority to take action against alleged predatory behavior, as well as the CFPB’s history in recharacterizing these types of arrangements as lending transactions potentially in violation of state licensing and usury laws.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 6
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Associate

Gabriel is an Associate on the Telecom team and the Co-Lead Associate on the Blockchain and Digital Assets team in the firm’s Washington, D.C. office. He is a Blockchain Law Professional as Certified by the Blockchain Council.

At Sheppard Mullin, Gabriel assists the Telecom team in all aspects of communications law and regulation including, satellites, spectrum, 5G implementation, media companies, and new technologies. He assists the Blockchain and Digital Assets team in legal issues relating to the use of blockchain technology, social media, internet, video games, online gambling,...

202-747-2194
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