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CFPB Takes Action Against Another Student Debt Relief Company

By | April 5, 2016

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.

ABOUT STINSON LEONARD STREET

Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 100 largest firms in the U.S., Stinson Leonard Street has offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

Zane Gilmer is a member of the firm’s litigation practice group.  His practice focuses on business litigation and compliance and he is a member of the firm’s CFPB taskforce.  Zane works out of the firm’s Denver office and he can be reached at zane.gilmer@stinson.com or 303.376.8416.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.

 

Contact Zane Gilmer for more information.