The Consumer Financial Protection Bureau recently ordered Student Aid Institute (“Student Aid”) to halt all debt relief operations and void all existing contracts. Student Aid misrepresented itself as a debt relief organization and duped thousands of individuals into believing that it was affiliated with the Department of Education. Furthermore, the company, as well as its CEO, Steven Lamont have been banned from the debt relief industry, and face a hefty penalty.
Headquartered in Sand Diego, California, Student Aid claimed to provide a service to individuals who were burdened with student loan debt that will reduce their monthly payments based on their income. These installments can range from zero dollars for unemployed and low income customers, to…
While this might sound like a very noble act, the Department of Education currently has payment plans in place that enable borrowers to set their own monthly installments based on their income, without being charged an additional fee. By charging a fee to struggling consumers, Student Aid Institute essentially stole millions of dollars from already financially distressed graduates.
According to the CFPB, the company deceived consumers by:
- Overcharging Advance Fees. According to Federal law, at the very least, a debt has to be reduced, renegotiated, or settled before any debt relief fees can be collected. However, not only were Student Aid Institute consumers charged a hundreds of dollars, they were also told to pay all, or a significant amount of the debt up front.
- Making false claims about services. The company provided false information to consumers about their eligibility for loan forgiveness, how much money they will save, as well as whether or not they were pre-approved for certain programs, and if fees were required for participation in federal programs.
- Failing to comply with privacy notices. Student Aid did not provide its customers with privacy notices as required by law.
- Misrepresenting its affiliation with the Department of Education. Student Aid used marketing materials to purport to have an relationship with the Department of Education.
What Action Has Been Taken?
According to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against companies who have participated in such illegal activities. The Order requires both Lamont as well as the Student Aid Institute to:
- Close down any debt relief undertakings. The company has to shut down all debt relief operations.
- Cancel all contracts and billing activities of its consumers. Effective immediately, Student Aid Institute has been ordered to stop charging consumers any fees. All contracts will be deemed null and void.
- Halt Any Participation in the Debt Relief Industry. The company is barred from providing any services in the debt relief industry.
- Pay A Fine. The Student Institute is required to pay a $50,000 fine.
To access a copy of the Student Aid Institute order, please click https://www.consumerfinance.gov/f/201603_cfpb_consent-order-student-aid-institute-inc-steven-lamont.pdf