A District Court judge has imposed a $43 million judgment against the owner of a defunct debt relief company in an enforcement action that was started back in 2020 by the Consumer Financial Protection Bureau.
The background and ruling: The case started five years ago when the CFPB filed suit against FDATR and its owners, Kenneth Halverson and Dean Tucci, for taking fees from consumers before providing any of the promised services, a violation of the Telemarketing Sales Rule (TSR). The lawsuit also alleged that the company misled customers about the services it offered. While the company failed to answer the complaint and default judgment was awarded earlier this year, Tucci’s liability for these violations was still under review. Halverson passed away in 2024.
Judge Georgia N. Alexakis of the District Court for the Northern District of Illinois granted summary judgment in favor of the CFPB back in January 2025, determining Tucci’s liability. What remained was the determination of the appropriate restitution and civil penalty. In her ruling, Judge Alexakis affirmed the CFPB’s request for $2,117,133.28 in restitution, based on the company’s net revenue from the illegal conduct, and a civil monetary penalty of $41,123,897, reflecting the severity of Tucci’s actions.
Key Questions Addressed: The court addressed two critical legal questions regarding the penalties:
- Restitution and the Liu Decision: The CFPB sought restitution based on gross revenue, rather than net profits, which is a key point of contention following the Supreme Court’s Liu v. SEC decision. The court agreed with the CFPB, noting that the restitution sought was “legal restitution,” which imposes personal liability, rather than “equitable restitution,” which would typically require tracing money to particular assets.
- Civil Penalties and the Seventh Amendment: The second issue was whether Tucci’s right to a jury trial under the Seventh Amendment applied to the civil penalty. Judge Alexakis found that the CFPB could request a civil money penalty without violating Tucci’s rights, referencing the Tull v. United States decision, which allows courts to determine civil penalties in cases brought under statutes like the Consumer Financial Protection Act (CFPA).
The Penalty Calculation: The civil penalty of $41.1 million was calculated based on the number of unique consumers affected by FDATR’s deceptive practices. The CFPB used a tiered approach, assessing the severity of the violations, with penalties for actions that occurred before and after FDATR was put on notice of its illegal practices by the State of Illinois in 2017. The penalty amount was further supported by the court’s review of the statutory framework, and the CFPB’s diligent calculations, which Tucci did not dispute.
Tucci’s Motion to Dismiss: Tucci also attempted to dismiss the case for lack of prosecution, citing an “effective shutdown” of the CFPB during the Trump administration. However, Judge Alexakis rejected this motion, emphasizing that there was no record of delay or misconduct by the CFPB in pursuing the case.
