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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