The Connecticut Department of Banking has issued a temporary cease-and-desist order, along with orders for restitution and disgorgement, against CDS Debt Relief LLC, doing business as CDS Financial, and its control persons David Lugo and Kevin Lugo, alleging the company collected payments from consumers for debt settlement services it never performed.
The Department also gave notice of its intent to impose civil penalties of up to $100,000 per violation.
According to the order, CDS Financial has never been licensed to engage in debt negotiation, debt adjustment or money transmission in Connecticut or any other state. The Department’s investigation began with a complaint filed Aug. 15, 2024, by a Connecticut resident who signed a contract with CDS Financial in December 2023. The contract called for a fee of 25% of the verified debt on each account settled. Connecticut’s Schedule of Maximum Fees caps debt negotiator fees at 10% of the amount by which a consumer’s debt is reduced. The contract also lacked the state’s required three-day cancellation disclosure.
The consumer enrolled $46,934 in unsecured debt and agreed to 36 monthly payments of $1,000. After making $7,000 in payments, the consumer began receiving collection calls from creditors whose accounts were enrolled in the plan. CDS Financial repeatedly disconnected the consumer’s calls, the order states.
Consumer payments were deposited into a general operating account rather than a separate account for the benefit of debtors, as state law requires. Bank statements from February through July 2024 showed deposits from 10 additional Connecticut consumers, transfers of $62,700 to David Lugo’s personal accounts, $95,008 in cash withdrawals, and credit card payments totaling $113,100 to American Express, $32,216 to Discover and $3,311 to Capital One. During the same period, the company deposited or attempted to deposit approximately 1,569 payments from consumers nationwide totaling $488,751. The statements did not show a single payoff of a consumer debt.
CDS Financial did not respond to four Department communications sent between August 2024 and December 2025.
The order requires the respondents to jointly and severally repay all amounts collected from Connecticut consumers since June 15, 2020, plus interest, and to disgorge related fees and revenue.
