The Consumer Financial Protection Bureau filed a brief yesterday seeking to convince a federal judge why it should be entitled to $43 million in penalties from the owner of a debt relief company. The case, CFPB v. FDATR, Inc., is being heard in the Northern District of Illinois, with Judge Georgia N. Alexakis presiding.
The CFPB’s motion comes after the company, FDATR, failed to respond to the complaint filed in 2020, leading to a default judgment earlier this year. The company’s owners, Kenneth Halverson and Dean Tucci, were named in the lawsuit, with Halverson passing away in 2024. Tucci, who controlled the company, is now the sole defendant in the case.
In its brief, the CFPB seeks restitution for consumer harm in the amount of $2.1 million and civil penalties totaling $41.1 million. The agency argues that Tucci’s actions caused significant financial distress to thousands of consumers by taking money upfront before delivering any promised services, in violation of the Telemarketing Sales Rule. This deceptive conduct continued despite previous warnings from the state of Illinois in 2017 about the company’s illegal activities.
Judge Alexakis raised two key questions regarding the penalty in the case:
- Whether the Supreme Court’s ruling in Liu v. SEC restricts restitution to FDATR’s net profits, rather than the total harm to consumers.
- In response, the CFPB argued that the Court should award restitution based on the full amount of consumer harm, not just FDATR’s net profits. The Bureau clarified that it seeks legal restitution, which is different from equitable restitution. The CFPB argued that it should not be limited by the Liu decision because the Bureau seeks legal restitution, which can be based on net revenues, not just net profits.
- Whether the Supreme Court’s ruling in SEC v. Jarkesy suggests that the CFPB’s request for a civil money penalty infringes on the Seventh Amendment right to a jury trial.
- The CFPB contended that Jarkesy does not apply in this case because it addressed a different issue.The Bureau argued that Congress, through the Consumer Financial Protection Act (CFPA), has authorized the court to impose civil penalties, and that such a determination does not require a jury trial.
