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CFPB Targets Student Loan Debt Relief Service for Deceiving Consumers

On March 30, 2016, the Consumer Financial Protection Bureau (CFPB) announced a consent order in an enforcement action against Student Aid Institute, a student loan debt relief service provider, as well as against its chief executive officer.  The CFPB alleged, among other things,  that the company deceived consumers about the benefits it could provide to consumers, deceived consumers by falsely representing that it was affiliated with the Department of Education, charged consumers advance fees for its services in violation of the Telemarketing Sales Rule, and failed to provide consumers with privacy notices, in violation of the Gramm-Leach-Bliley Act and Regulation P.  In the consent order, the company agreed to pay a $50,000 civil monetary penalty, shut down its debt relief operations, and cancel its contracts with consumers.

This action represents the latest in a long series of enforcement actions that the CFPB has brought against debt relief service providers that overstate their ability to save consumers money and illegally charge consumers up-front fees before achieving the benefits they promise.  It also represents yet another instance in which the CFPB has targeted one or more individuals who own or manage an entity, rather than simply the entity itself, as a means of ensuring full accountability and preventing such individuals from continuing to engage in misconduct by forming new entities to do so.  As in these other enforcement actions, the CFPB’s order enjoins the chief executive officer of the Student Aid Institute from owning any debt relief services provider or working in any capacity for any person engaged in providing debt relief services.

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Greenberg Traurig's Financial Services Litigation Practice has wide-ranging experience assisting clients in a variety of matters affecting the financial services industry. We regularly advise and defend global, national, regional, and local banks; venture capital and private equity firms; mortgage lenders; credit card companies; consumer finance companies; and other financial institutions. First and foremost, we are trial lawyers, and have a great breadth of experience litigating on behalf of our clients in disputes in U.S. state and federal courts, as well as in...

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