The Consumer Financial Protection Bureau (CFPB) has announced a complaint against Student Financial Aid Services, Inc., alleging illegal sales and billing practices.
Filed last week in federal court, the grievance contends that the company lured in customers with misleading information about the total cost of its subscription financial services, which featured undisclosed and unauthorized automatic recurring charges. Under an order proposed by the CFPB, the firm would halt illegal practices and pay $5.2 million in restitution to affected customers.
"Student Financial Aid Services, Inc. made millions of dollars at the expense of consumers through its illegal recurring payment scheme," said CFPB Director Richard Cordray in a written statement. "Our enforcement action will put money back in the pockets of consumers who were misled while seeking to access federal student aid."
According the Bureau, when consumers entered their payment information for certain financial advisory services, the company began to bill them for an annual subscription without the consumers' knowledge or consent. These recurring charges typically ranged from $67 to $85 each year and were renewed annually. This behavior puts Student Financial Services is violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The company also violated the Electronic Fund Transfer Act by failing to get appropriate authorization for future electronic withdrawals from consumer accounts.
In addition to consumer relief fine and the order to end illegal practices, the CFPB is arguing that the firm be required to pay a $1 fine to the bureau's Civil Penalty Fund. The amount is that low due to the company's limited financial resources after repaying harmed consumers. By requiring the company to pay a $1 penalty, victims of the company's illegal practices may be eligible for additional relief from the CFPB Civil Penalty Fund in the future, although that determination has not yet been made.