The CFPB announced yesterday (March 30) that it has taken action against a student loan debt relief scam that causes borrowers to pay for illegal fees tied to federal loan benefits that the company claimed to be associated with the Department of Education.
According to the CFPB’s report, the company in question is Student Aid Institute, and it has since halted its debt relief services and has been ordered to stop charging impacted customers. The company’s CEO, Steven Lamont, was also ordered to pay a penalty, and he and the company have been barred from the debt relief industry. The order also imposes a penalty of $50,000 to be paid into the CFPB’s Civil Penalty Fund.
“We see more and more companies and websites demanding large upfront fees to help student loan borrowers enroll in income-driven plans that are available for free,” said CFPB Director Richard Cordray. “These practices bear a disturbing resemblance to the mortgage crisis, where distressed consumers were preyed upon with false promises of relief. We will continue to shut down illegal scams and address sloppy servicing practices that victimize consumers.”
Student Aid Institute is a debt relief services company that offers to reduce consumers’ student loan payments. The company is headquartered in San Diego, Calif.
According to the CFPB’s findings, Student Aid Institute deceived consumers by marketing and advertising debt relief services to student loan borrowers. The company wasn’t truthful about the benefits of its services and deceived customers to pay fees it said were required to participate in federal student loan programs. In reality, those programs were free, but the company reaped millions of dollars in fees from thousands of consumers.
“We appreciate CFPB’s continued vigilance and leadership in weeding out those who seek to prey on struggling student loan borrowers,” said U.S. Secretary of Education John B. King Jr. “We will continue to work with CFPB to ensure that affected borrowers get the free help they deserve to manage their payments. To all the Americans out there working hard to keep up with your student loan payments, please remember: You never have to pay for help.”