The Consumer Financial Protection Bureau (CFPB) is taking action against a student loan debt relief scam that illegally tricked borrowers into paying fees for federal loan benefits. The company also claimed it was affiliated with the Department of Education, when, in fact, it has no such partnership.
The CFPB is ordering Student Aid Institute and its chief executive officer, Steven Lamont, to pay a penalty, halt debt relief services, and stop charging affected customers. The CFPB is also permanently barring the company and Lamont from the debt relief industry.
The California-based company marketed and advertised debt relief services to struggling student loan borrowers. The company deceived customers about the benefits of their services and misrepresented that fees were required to participate in federal student loan programs when those programs were, in fact, free. The Department of Education doesn't require any advanced fees before taking part in one of its repayment programs.
Student Aid Institute charged students hundreds of dollars, and required all, or a substantial portion, of its fees to be paid upfront. Federal law requires that at least one debt to be renegotiated, settled, or reduced before fees can be collected.
The company also misrepresented the benefits and terms of its services and failed to provide required privacy notices to the students who did sign up.
Despite having no partnership with the Department of Education, the company's marketing material falsely implied that the two were affiliated and the company was endorsed by the federal government.
A copy of the Student Aid Institute order is available here.