On October 29, the Consumer Financial Protection Bureau filed a complaint in the Southern District of California against Global Financial Support, Inc. and its owner and CEO, Armond Aria, for allegedly engaging in a nationwide student financial aid scam.
The Bureau claims that Defendants violated the UDAAP provisions of the Consumer Financial Protection Act when they engaged in deceptive conduct to induce consumers into paying fees ranging from $59 to $78 for financial services that Defendants did not provide. The deceptive acts included: (i) tricking consumers into thinking they were applying for financial aid services; (ii) falsely representing an affiliation with the government or academic institutions; (iii) falsely representing that the Defendants will match students with targeted financial aid opportunities; and (iv) putting pressure on consumers with threats of losing financial aid opportunities by setting arbitrary deadlines. The CFPB also alleges that Defendants violated Regulation P, 12 C.F.R. §1016.4(a), by failing to provide customers with a clear and conspicuous privacy notice upon commencement of a customer relationship.
According to the Complaint, Aria and Global Financial Support, Inc., which operates under the names Student Financial Resource Center and College Financial Advisory, have obtained at least $4.7 million in fees from at least 76,000 consumers since Aria created the company in February 2005. The CFPB is seeking injunctive relief to stop the unlawful practices, monetary damages to provide restitution to harmed consumers, and penalties for illegal conduct. The Complaint is available at http://files.consumerfinance.gov/f/201510_cfpb_complaint-for-permanent-injunction-and-other-relief-college-financial-advisory.pdf.
Regulators and enforcers are paying increasing attention to issues regarding the student financial aid industry. In December 2014, the CFPB issued a warning to consumers and initiated action in response to student debt relief scams. Navient, the nation’s largest student loan company, disclosed in a recent SEC filing that it received a letter from the CFPB on August 19. The letter served to advise Navient that the CFPB is considering taking legal action in connection with the company’s disclosures, assessment of late fees, and other matters.
At the state level, Illinois Attorney General Lisa Madigan filed five lawsuits in May 2015 against companies targeting individuals struggling to repay their student loan debt. According to the complaints, the companies charged borrowers upfront fees with the false promise that they could relieve borrowers’ debt loads or have them forgiven entirely under programs endorsed by President Obama’s administration.
Similarly, in 2014, New York Governor Andrew Cuomo announced the establishment of a Student Protection Unit within the New York State Department of Financial Services. On July 1, following an investigation by the Student Protection Unit, debt relief provider Interactiv Education, LLC (d/b/a Direct Student Aid, Inc.) began the process of winding down and ceasing operations nationwide. Direct Student Aid advertised that it could reduce or lower customers’ monthly student loan payments and charged consumers upfront fees ranging from $99 to $3,400. Direct Student Aid obtained this advertised relief merely by completing applications for Direct Consolidation Loans, which are freely available to consumers through the Department of Education.
The October 29 CFPB lawsuit illustrates that authorities are in no way slowing down their crackdown on alleged bad actors in the student loan/student debt industry. By all indications, as lawmakers, regulators, and enforcers continue to grapple with the effects of the student loan debt crisis on the economy, they will increase their scrutiny of the student financial aid industry.