CFPB Targets Brazen Student Debt Relief Scam Reboot

By Hugh T. Ferguson, NASFAA Managing Editor

The Consumer Financial Protection Bureau (CFPB) on Thursday announced that it is taking action against the owner of a student loan debt relief company that allegedly, without authorization, withdrew hundreds of thousands of dollars from student borrowers’ bank accounts, by obtaining their account information from a previous debt relief scammer that the agency shut down in 2016.

In this latest scam, CFPB alleges that Frank Gebase, Jr. controlled a company that took borrowers’ money by relying on his connections to a previous scam operation. 

Back in 2016, CFPB took action against Student Aid Institute, Inc., and its Chief Executive Officer Steven Lamont, for 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.

Gebase had leased office space to Student Aid Institute, and according to CFPB he was a longtime associate of its principal.

In 2016, just prior to CFPB’s order against Student Aid Institute, Gebase founded Processingstudentloans in San Diego, California. Gebase was the founder, sole owner, CEO, and sole corporate officer of Processingstudentloans and did not solicit new customers. Instead, the CFPB alleges that it obtained student loan account and billing information for hundreds of borrowers, who were formerly customers of Student Aid Institute, without their knowledge or consent.

The CFPB alleges that by April 2017, Gebase’s company had unlawfully debited more than $240,000 from hundreds of student borrowers’ accounts. According to CFPB’s complaint, the company received complaints from borrowers “questioning why consumer’s accounts continued to be debited despite SAI being shut down.” Still, according to the complaint, Gebase claims he did not run the company, nor monitor the company or its employees.

“Gebase knew of, or was recklessly indifferent to, the fact that Processingstudentloans was debiting consumers’ accounts and that Processingstudentloans did not obtain consumer authorization for those withdrawals,” the complaint states.

CFPB’s proposed settlement, if entered by the court, would ban Gebase from the debt relief industry and order him to pay a penalty of $175,000 to CFPB, which will then be deposited into the CFPB’s victims relief fund. In their lawsuit CFPB will also be seeking additional relief that a court deems necessary to redress injury to consumers resulting from Gebase’s operation.

“Frank Gebase brazenly rebooted a student debt-relief scam the CFPB shut down over six years ago,” said CFPB Director Rohit Chopra. “When student loan servicers don’t provide clear and accurate information to borrowers, it sets the stage for scammers to swoop in.”


Publication Date: 6/13/2022

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