Consumer Finance Insights
October 31, 2019

CFPB Announces Action to Halt Student-Loan Debt-Relief Operation

On October 30, 2019, the Consumer Financial Protection Bureau (CFPB) announced an action to halt a student-loan debt-relief operation engaged in allegedly unlawful conduct. The CFPB filed its complaint on October 21, 2019 and requested a temporary restraining order in the U.S. District Court for the Central District of California. The court granted the request.

The CFPB alleged that since at least 2015, the debt-relief companies and individual defendants operated as a common enterprise and deceived thousands of federal-student-loan borrowers, charging over $71 million in unlawful advance fees in connection with the marketing and sale of student-loan debt-relief services to consumers.

The complaint further alleged that the companies violated the Consumer Financial Protection Act of 2010 (CFPA) and the Telemarketing Sales Rule (TSR) by making deceptive representations about the companies’ student-loan debt-relief and modification services. According to the complaint, the companies charged and collected improper advance fees before consumers had received any adjustment of their student loans or made any payment toward such adjusted loan. The CFPB also alleges that the defendants engaged in deceptive practices by misrepresenting: the purpose and application of fees charged by the companies; their ability to obtain loan forgiveness; and their ability to lower consumers’ monthly payments. The CFPB further alleges that the defendants failed to inform consumers that the companies automatically request that consumers’ loans be placed in forbearance so that consumers can better afford the companies’ significant fees, and that the companies submit false information to student-loan servicers in loan-adjustment applications in an effort to qualify consumers for lower monthly payments.

The Bureau’s complaint seeks an injunction, damages, redress to consumers, disgorgement of ill-gotten gains, and civil money penalties.