On June 9, the CFPB filed a complaint and proposed order in California federal district court seeking final judgment against the owner of a student loan debt relief company for allegedly withdrawing more than $240,000 from the bank accounts of student borrowers without authorization.
According to the complaint, the defendant, through his company, obtained student loan account and billing information for hundreds of borrowers without the borrowers' knowledge or consent from another student loan debt relief operation that the CFPB previously shut down, and subsequently used that information to withdraw unauthorized funds from student borrowers' bank accounts. The Bureau alleges that through his actions as the company's chief executive, defendant engaged in and substantially assisted in unfair acts and practices in violation of the CFPA—specifically, that in addition to controlling the company and facilitating the debits, defendant was aware or should have known the debits were unauthorized given that it obtained borrowers' information from the previously shuttered company without the borrowers' knowledge or consent, and collected recurring fees from borrowers without authorization or entering into any contracts or agreements with the borrowers.
If approved by the court, defendant would be required to pay a $175,000 penalty to the Bureau and would be permanently banned from offering, providing, or assisting others in offering or providing debt-relief products or services, financial advisory services, and other consumer financial products or services.
Putting It Into Practice: The CFPB has recently initiated other enforcement actions against student loan debt relief companies (we discussed these actions in previous blog posts here and here.) According to CFPB Director Rohit Chopra, this recent enforcement action serves as a reminder that "[w]hen student loan servicers don't provide clear and accurate information to borrowers, it sets the stage for scammers to swoop in." Student loan and debt relief companies should take heed of the CFPB's Directors comments here and ensure that they protect against potentially fraught transfers of sensitive borrower information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.