On March 30, 2016, the Consumer Financial Protection Bureau (CFPB) announced an enforcement action against student debt relief company Student Aid Institute, Inc., and its chief executive officer, Steven Lamont, for allegedly engaging in deceptive acts and practices in connection with student debt relief services offered to consumers.
The CFPB alleges that Student Aid Institute deceived customers about the benefits of its services and misrepresented that payment of fees were required to participate in federal student loan programs, when no such fees were required. Specifically, the CFPB alleges that Student Aid Institute:
- Charged illegal upfront fees for debt relief services, prior to the company actually negotiating or settling any consumer debts;
- Deceived consumers about the amount of money they would save by using the company’s services, whether they were eligible for loan forgiveness, whether they had been preapproved for specified programs, and whether the fees were required to participate in the federal programs;
- Failed to provide consumers with privacy notices; and
- Falsely represented an affiliation with the Department of Education in its marketing materials.
As part of the consent order entered by the CFPB, Student Aid Institute and Lamont must:
- Shut down their debt relief operations and cease any further debt relief services;
- Cancel all contracts with consumers and stop charging them for services;
- Ensure that consumers do not miss repayment deadlines; and
- Pay a civil penalty of $50,000.
The CFPB has made it clear that one of its enforcement priorities is to take action against companies that are engaging in allegedly illegal practices within the student debt relief industry. This enforcement action simply underscores that ongoing priority and it should also serve as a reminder to participants in that industry to review their policies, procedures, and practices to ensure compliance with relevant law and the CFPB’s expectations.
You can view the CFPB’s consent order here.