CFPB, 3 states move against student loan debt relief companies

A student loan debt relief operation involving numerous companies has been forced to temporarily halt activities under a restraining order sought in connection with action filed by the Consumer Financial Protection Bureau (CFPB) and law enforcement officials in Minnesota, North Carolina, and California.

CFPB said the action seeks to halt a student-loan debt-relief operation that engaged in allegedly unlawful conduct and consisting of several related companies: Consumer Advocacy Center Inc., which does business as Premier Student Loan Center; True Count Staffing Inc., also known as SL Account Management; and Prime Consulting LLC, which is known as Financial Preparation Services.

Defendants also include Albert Kim, Kaine Wen, and Tuong Nguyen, whom the bureau alleges substantially assisted the student-loan debt-relief companies, the bureau said. The action was brought under the Consumer Financial Protection Act (CFPA) of 2010; and the Telemarketing and Consumer Fraud and Abuse Prevention Act and its implementing regulation, the Telemarketing Sales Rule (TSR).

The bureau alleges that since at least 2015, the debt-relief companies operated as a common enterprise and deceived thousands of federal-student-loan borrowers and charged over $71 million in unlawful advance fees in connection with the marketing and sale of student-loan debt-relief services to consumers.

As described in the complaint, the bureau alleges that:

  • Premier and its company co-defendants violated the CFPA and TSR by making deceptive representations about the companies’ student-loan debt-relief and modification services; specifically, it alleges that Premier charged and collected improper advance fees before consumers had received any adjustment of their student loans or made any payment toward such adjusted loan.
  • Defendants engaged in deceptive practices by misrepresenting the purpose and application of fees charged by the companies, their ability to obtain loan forgiveness, and their ability to lower consumers’ monthly payments.
  • Defendants failed to inform consumers that the companies automatically request that consumers’ loans be placed in forbearance so that consumers can better afford the companies’ significant fees and that the companies submit false information to student-loan servicers in loan-adjustment applications in an effort to qualify consumers for lower monthly payments.
  • Individual defendants substantially assisted the student-loan debt-relief companies.

The bureau said it filed the complaint and requested a temporary restraining order in the U.S. District Court for the Central District of California on Oct. 21; the temporary restraining was ordered that day. The court has scheduled a hearing for Nov. 4 on the request for a preliminary injunction. “The Bureau seeks to keep this relief in place while the case proceeds,” the agency said in Wednesday’s announcement.

The complaint seeks an injunction against defendants, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties. It also names several defendants in order to obtain relief, and seeks disgorgement of those relief defendants’ ill-gotten gains.

Complaint