On October 29, 2015, the Consumer Financial Protection Bureau (CFPB or the Bureau) announced a lawsuit initiated against a company and the company's owner for alleged fraud in student financial aid activity. The company operates under the names of Student Financial Resource Center and College Financial Advisory. Over the course of the company's operation, the CFPB alleges that the over 76,000 consumers were fraudulently charged roughly $4.7 million in fees.

Since at least January 2011, the company has sent millions of letters to students and their families claiming to provide the service of matching them with targeted financial aid assistance programs for a fee. The alleged deception is twofold. First, the CFPB alleges that these letters are deceptive and exploit consumer uncertainty regarding free federal financial aid resources. Second, the CFPB alleges that the company often provides nothing in exchange for the fees charged, or provides only generic information. In addition, the CFP alleges that the company violated federal privacy law by failing to provide a required privacy notice.

The allegedly deceptive letters promised consumers that the company would conduct extensive searches to target or match consumers with individualized financial aid opportunities. The letters also used logos and seals meant to look like the materials were endorsed by the government. Sometimes the letters would use the name of the student's university to give the impression of endorsement. The letters also included false deadlines that did not connect to any actual deadline for federal student aid.

As stated in the complaint, the company does not apply for financial aid programs on the student's behalf and does not conduct extensive searches to match students with particular student financial aid. In addition, the company is not in any way affiliated with the federal government or the student's university.

The alleged deception extends to the company's websites, phone service, and physical address. Other allegedly deceptive practices identified by the Bureau include:

  • The use of websites ending in .org, a domain commonly known to indicate a non-profit organization
  • Directing consumers calling for customer service to a third party answering service that disclaims any association with the company, and purportedly forwards any message along to the company
  • Maintaining a postal box that is listed as the company's physical address

This action against a student-facing company follows the CFPB's actions last year against two similar companies operating in the student financial aid space. In addition, the CFPB issued an alert warning against student loan debt relief companies. Student lending and debt servicing continue to be priorities for the Bureau. This most recent action shows that the CFPB is reaching beyond debt relief into other ways companies may be taking advantage of students and their families.

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