Consumer Financial Protection Bureau Addresses Student Loan Debt Scam

The Consumer Financial Protection Bureau (CFPB) has promised to crack down on debt collection scams, particularly those that make fraudulent assurances about being able to help consumers get out of debt. Given that student loan debt is a mounting problem in our country, the CFPB has focused much of its attention on student loan debt scams, according to a recent article from ACA International. Late last month, the CFPB filed a consent order aimed at Student Aid Institute, Inc., a company that “advertised debt relief services to borrowers behind on their loans” yet “charged fees for federal student loan programs that are available at no cost.”
With current student loan debt in the trillions, it may not come as a surprise that certain companies are attempting to profit from the anxiety that many former students are facing due to their student loans. However, as the article makes clear, the Dodd-Frank Wall Street Reform and Consumer Protection Act makes scams like this one illegal and allows the CFPB to take enforcement actions against companies like Student Aid Institute, Inc.
Desperate Student Loan Debtors Pay Fees for Free Debt Relief Programs
The CFPB alleges that Student Aid Institute, Inc. made millions of dollars from student loan debtors solely in advance fees charged for these no-cost federal debt relief services. For debtors in the Chicago area who are struggling to make student loan payments, promises from companies to lower those payments can seem like welcome relief. However, what many debtors do not know is that federal student debt relief programs should not incur advance fees and should not cost the debtor more money in order to obtain a manageable repayment schedule.
In addition to charging advance fees for student debt relief—and profiting off those fees substantially—the CFPB also alleges that Student Aid Institute, Inc. also “reportedly misrepresented information to consumers about how much they would save through repayment plans, their loan forgiveness eligibility, and federal fee requirements.” Moreover, the company is also alleged to have failed in providing consumers with timely privacy notices. While the latter allegation might seem like the least harmful of the ones listed, such allegations nonetheless can injure consumers.
Consent Order to Cease Operations
What happens when the CFPB files a consent order to stop student loan debt relief scams? In this case, the consent order requires Student Aid Institute, Inc. to do the following:
  • Stop operations related to debt relief;
  • Cancel all current contracts with consumers;
  • Give consumers already affected by the alleged scam free information about income-driven repayment options and loan forgiveness programs; and
  • Pay $50,000 in fines to the CFPB’s Civil Penalty Fund.
The primary focus of the consent order filed by the CFPB is to get companies engaging in student loan debt relief scams to stop what they are doing. Student borrowers should understand that it is free to apply for income-driven repayment plans, and they do not need to provide advance fees to be eligible for these federal options.
If you have questions about student loan debt relief or have been the victim of a scam, you should discuss your situation with an experienced Oak Park consumer protection attorney as soon as possible. Contact the Emerson Law Firm today.

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