CFPB Targets Student Loan Debt Relief Scam Reboot – Financial Services

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On June 9, the CFPB filed a complaint and proposed order in California federal district court
seeking final judgment against the owner of a student loan debt
relief company for allegedly withdrawing more than $240,000 from
the bank accounts of student borrowers without authorization.

According to the complaint, the defendant, through his company,
obtained student loan account and billing information for hundreds
of borrowers without the borrowers’ knowledge or consent from
another student loan debt relief operation that the CFPB previously
shut down, and subsequently used that information to withdraw
unauthorized funds from student borrowers’ bank accounts. The
Bureau alleges that through his actions as the company’s chief
executive, defendant engaged in and substantially assisted in
unfair acts and practices in violation of the
CFPA—specifically, that in addition to controlling the
company and facilitating the debits, defendant was aware or should
have known the debits were unauthorized given that it obtained
borrowers’ information from the previously shuttered company
without the borrowers’ knowledge or consent, and collected
recurring fees from borrowers without authorization or entering
into any contracts or agreements with the borrowers.

If approved by the court, defendant would be required to pay a
$175,000 penalty to the Bureau and would be permanently banned from
offering, providing, or assisting others in offering or providing
debt-relief products or services, financial advisory services, and
other consumer financial products or services.

Putting It Into Practice: The CFPB has recently
initiated other enforcement actions against student loan debt
relief companies (we discussed these actions in previous blog posts
here and here.) According to CFPB Director Rohit
Chopra, this recent enforcement action serves as a reminder that
“[w]hen student loan servicers don’t provide clear and
accurate information to borrowers, it sets the stage for scammers
to swoop in.” Student loan and debt relief companies should
take heed of the CFPB’s Directors comments here and ensure that
they protect against potentially fraught transfers of sensitive
borrower information.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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