On July 23, 2015, the CFPB took action against Student Financial
Aid Services, Inc. for illegal sales and billing practices. The
CFPB filed a complaint and proposed consent order in federal court, which
alleged that the company lured consumers with misleading
information about the total cost of its subscription financial
services and then hit them with undisclosed and unauthorized
automatic recurring charges. Under the proposed consent order, the
company would be enjoined from continuing its illegal billing
practices, and would be required to pay $5.2 million, to be
distributed to the CFPB and injured consumers.
Student Financial Services, Inc. (SFAS) is based in California, and
until recently operated the websites FAFSA.com and SFAS.com,
through which it offered fee-based assistance to consumers seeking
help filling out the federal government's Free Application for
Federal Student Aid (FAFSA). According to the CFPB's complaint,
when consumers entered their payment information for certain
financial advisory services, the company began to bill them for an
annual subscription without the consumers' knowledge or
consent. The recurring charges ranged from $67 to $85 per year, and
were renewed annually. The CFPB alleges that Student Financial Aid
Services, Inc. violated the Dodd-Frank Wall Street Reform and
Consumer Protection Act's prohibitions against unfair and
deceptive acts and practices by misleading consumers about the
recurring charges, and violated the Electronic Fund Transfer Act by
failing to get authorization for future electronic withdrawals from
consumers' accounts. The CFPB's complaint specifically
alleges that the company:
- Misled consumers by using deceptive sales tactics through its websites and through its call centers when it advertised certain service plans as "upgrades" at "no additional cost," when, in reality, the consumers who signed up for the upgraded services were automatically charged fees that ranged from $67 to $85 each year.
- Enrolled consumers in an unlawful recurring payments scheme without consumers' knowledge or consent.
- Charged consumers' accounts without their authorization and without providing consumers a copy of that authorization as required by law.
Under the Dodd-Frank Act, the CFPB has the power to take action
against institutions or individuals engaged in unfair, deceptive,
or abusive acts or practices. Pursuant to this authority, the
CFPB's proposed consent order would require Student Financial
Services, Inc. to:
- Pay $5.2 million in consumer relief to the CFPB to repay consumers who were illegally charged for unauthorized, recurring service fees.
- End its illegal sales and billing practices, which include cancelling all recurring, automatic charges.
- Pay a civil monetary penalty.
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