August 14, 2022

Volume XII, Number 226

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August 11, 2022

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CFPB Targets Student Loan Debt Relief Scam Reboot

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.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume XII, Number 166
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About this Author

Moorari Shah Bankruptcy Lawyer Sheppard Mullin Law Firm
Partner

Moorari Shah is a partner in the Finance and Bankruptcy Practice Group in the firm's Los Angeles and San Francisco offices. 

Areas of Practice

Moorari combines deep in-house and law firm experience to deliver practical, business-minded legal advice. He represents banks, fintechs, mortgage companies, auto lenders, and other nonbank institutions in transactional, licensing, regulatory compliance, and government enforcement matters covering mergers and acquisitions, consumer and commercial lending, equipment finance and leasing, and supervisory examinations,...

213-617-4171
A.J. S. Dhaliwal Bankruptcy Attorney Sheppard Mullin Washington DC
Associate

A.J. is an associate in the Finance and Bankruptcy Practice Group in the firm's Washington, D.C. office. 

A.J. has over a decade of experience helping banks, non-bank financial institutions, and other companies providing financial products and services in a wide range of matters including government enforcement actions, civil litigation, regulatory examinations, and internal investigations.

With a diversified regulatory, compliance, and enforcement background, A.J. counsels financial institutions in matters involving...

202-747-2323
Associate

Pouneh Almasi is an associate in the Intellectual Property Practice Group in the firm's San Francisco office.  

Areas of Practice

Pouneh’s practice focuses on intellectual property litigation with an emphasis on copyright and trademark issues.  She is also a member of the firm’s Blockchain Technology & Digital Currency Team.

During law school, Pouneh worked as a judicial extern to the Honorable Jacqueline Scott Corley at the Northern District of California in San Francisco...

415-774-3103
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