CFPB files action against Burlington Financial Group

The CFPB has announced it has filed a proposed order in federal district court against Burlington Financial Group and its owners and executives, Richard Burnham, Katherine Burnham, and Sang Yi, for allegedly deceiving consumers into hiring the company to lower or eliminate credit-card debts and improve consumers’ credit scores.

The CFPB also filed a joint complaint against the company and its owners and executives with the Attorney General for the State of Georgia.

The CFPB alleges that Burlington Financial violated the Telemarketing Sales Rule and the Consumer Financial Protection Act through deceptive marketing and operation of its debt-relief credit-repair services. The company advertised to potential customers, through direct mailers and third-party lead generators, that its so-called “debt validation” program used a legally vetted process to eliminate debt. The company’s marketing materials stated that their debt-reduction program takes between 8 to 12 months, but the CFPB’s investigation found that the company failed to produce any evidence showing that it had invalidated, eliminated, or lowered any of its customers debt.

The CFPB’s investigation also found that the company encouraged its customers to stop paying their debts, thereby causing customers to suffer additional consequences, such as collection lawsuits and damaged credit scores. Meanwhile, for its services, the company charged its customers upfront fees of 40% of the debt amount owed, with an average cost of $21,000 per customer or $552 in monthly payments.

The CFPB also alleges that Burlington Financial Group violated the TSR and CFPA by telling customers that it could restore their credit scores and that it had a “credit restoration team.” The CFPB’s investigation found that these claims are false or unsubstantiated. For example, the company did not obtain its customers’ original credit scores prior to enrollment into their program – nor did the company track its customers credit scores during or after their departure from the program. In contrast to the company’s marketing materials, the CFPB found that many of its customers showed their actual credit scores worsened as a result of using the company’s services.

The proposed order would:

• Permanently ban Burlington Financial and its owners and executives from telemarketing any consumer financial product or service and from offering, marketing, selling, or providing any financial-advisory, debt-relief, or credit-repair service;
• Require Burlington Financial and its owners and executives to pay a total civil money penalty of $150,001, of which $15,000 will be remitted to the State of Georgia; and
• Impose a judgment for redress of at least $30 million to be suspended upon payment of the $150,001 civil money penalty.