Blog Enforcement Watch August 10, 2021

California Settles with Student Loan Debt Relief Company for Allegedly Collecting Illegal Fees

On August 9, 2021, the California Department of Financial Protection and Innovation (DFPI) announced ​that it had entered into a settlement agreement with a Tustin-based student loan d​ebt relief company, resolving allegations that the company violated the California Consumer Financial Protection Law (CCFPL) when it collected illegal advance fees under the Telemarketing Sales Rule (TSR). This settlement comes as the DFPI seeks to crackdown on student loan debt relief companies that allegedly violate the new California consumer protection law. The CCFPL makes it unlawful to engage in unfair, deceptive, or abusive acts or practices with respect to consumer financial products or services.

​The DFPI alleged that the company offered to assist consumers in reducing or eliminating their student loans, and the company allegedly charged consumers upfront fees between $799-$899 upon enrollment as well as, in some cases, monthly fees of $39 for its services. The DFPI alleged that the company violated the CCFPL by charging advance fees that are prohibited under the TSR.

Under the settlement agreement, the company agreed to refund student loan borrowers $870,000 in fees that it collected and pay a $500,000 penalty to the DFPI. Additionally, the company has agreed to cease its practice of collecting advance fees and cancel the allegedly unlawful contracts with existing consumers.

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