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.

See Related Blog Posts:

Comments

Post a Comment

Popular posts from this blog

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago , such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe. How can you avoid becoming a victim in a debt-collection scam ? What should you do if you have been targeted by a fake debt collector? How Do Phantom Debt Collection Scams Work? Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these c...
Read more

Payday Lending and Predatory Lenders in Illinois

If you are in substantial debt in the Chicago area and are living in a paycheck-to-paycheck cycle, you may have taken out a payday loan to make ends meet. While payday lending is illegal in a number of states due to the predatory nature of these loans, it remains legal in Illinois. As a result, many debtors in the state have used payday lenders, and far too many of those borrowers cannot repay what they owe. According to a recent article from Progress Illinois , consumers have filed complaints about payday lenders in the state, illuminating a need for federal rules that address harmful lending practices . Predatory Payday Lenders and Protections for Consumers Due to the perceived predatory nature of payday loans, twelve states in the country have banned these lenders from operating completely, according to a fact sheet from loans.org . The states that currently have laws prohibiting payday lenders from operating include Arkansas, Arizona, Connecticut, Georgia, Mary...
Read more

New Information on Debts That Bankruptcy Cannot Discharge

If you are thinking about filing for bankruptcy in the Oak Park area, it is important to know that certain kinds of debts cannot be discharged in a bankruptcy case. Under U.S. bankruptcy law, these are known as non-dischargeable debts, or exceptions to discharge. There are certain types of debts that have long been identified clearly as non-dischargeable debts, while there are misconceptions about other types of debts that may or may not be dischargeable. As an article in CNBC discusses, the U.S. Supreme Court recently issued a ruling in the case of Bartenwerfer v. Buckley , which clarifies that debts incurred due to another party’s fraud cannot be discharged in an individual’s bankruptcy case. Our Oak Park bankruptcy attorneys can explain the Court’s recent ruling and provide you with additional information on dischargeable and non-dischargeable debts. Supreme Court Says Debt Incurred Due to Another’s Fraud is Non-Dischargeable The recent Bartenwerfer case involved a debtor attempti...
Read more