The Consumer Financial Protection Bureau (CFPB) on Wednesday took action against a student debt relief company accused of illegally getting borrowers to pay fees for federal loan benefits and misrepresenting an affiliation with the Department of Education (ED).
The consent order issued by CFPB accuses Student Aid Institute, Inc., and its Chief Executive Officer Steven Lamont, of illegally marketing debt relief to student loan borrowers struggling with their debt and misrepresenting that fees were required to participate in federal student loan programs that are, in fact, free. According the CFPB, the company "ultimately reaped millions of dollars in advance fees from thousands of consumers," which were illegally charged in the first place. The company also misrepresented to consumers the benefits and terms of its services, failed to provide required privacy notices, and misrepresented an affiliation with ED through its marketing materials.
Under the consent order, Student Aid Institute, Inc. and Lamont are required to cease all debt-relief operations and cancel all contracts and charges with its customers immediately. The company must also work with customers to ensure they do not miss repayment benefits and paperwork needed to enroll or stay enrolled in income-driven repayment programs through ED.
The company and Lamont are also barred from "offering, or receiving any payments from, debt relief services" and must pay a $50,000 penalty into CFPB's Civil Penalty Fund, according to the consent order.
Wednesday's order is the second of its kind this month after CFPB requested on March 15 that a federal district court enter a final judgment and order that would shut down Student Loan Processing.US, a student debt relief company that also charged borrowers million of dollars in upfront fees for federal student loan services. Both cases indicate an uptick in activity by CFPB and ED to warn borrowers of these kind of scams and increase awareness of the repayment options available to borrowers.
"We see more and more companies and websites demanding large upfront fees to help student loan borrowers enroll in income-driven plans that are available for free," CFPB Director Richard Cordray said in a press release. "These practices bear a disturbing resemblance to the mortgage crisis where distressed consumers were preyed upon with false promises of relief. We will continue to shut down illegal scams and address sloppy servicing practices that victimize consumers."
Publication Date: 3/31/2016