Fine reduction offered by CFPB from $3.8 million to $20,000 for illegal fees firm charged in student loan scheme

Millions of dollars in fines against a Florida company for charging illegal fees to consumers to purportedly relieve them of their federal student loan payments will be reduced to just a fraction of that under a settlement announced by the federal consumer financial protection agency Wednesday.

The Consumer Financial Protection Bureau (CFPB) said it has settled with Timemark, Inc., a Deerfield Beach, Fla., firm that provides debt-relief services to consumers with federal student-loan debt. The bureau said the settlement also includes its owners and officers: Timothy Lenihan, Sr., Mark Nagler, and Casey Gassaway.

According to the agency, the defendants allegedly charged illegal advance fees in violation of the Telemarketing Sales Rule (TSR) to consumers who were seeking to renegotiate, settle, reduce, or alter the terms of their student loans. The bureau said its settlement would permanently ban the company’s officers named in the action from providing debt-relief services. It would impose a judgment totaling approximately $3.8 million in consumer redress and civil money penalties, the bureau said.

However, if the defendants pay a total of $22,000 among them within 10 days after the order is entered by the court, the agency said, the full payment of $3.8 million will be suspended. CFPB said the three would be relieved from paying the penalties because of their “limited ability to pay more based on sworn financial statements.”

On top of that, the bureau said, “The defendants would also be required to each pay a $1 civil money penalty, in light of their financial circumstances.”

Under the 10-day fine proposal, Timemark would pay $5,000; Nagler, $7,000; and Gassaway, $10,000.

The bureau also said that, assuming continued available funds, it will work to provide full redress to eligible harmed consumers from this fund.

CFPB said its complaint against the company and the three principals alleged that from 2016 through October 2019, they used telemarketing campaigns to convince more than 7,300 consumers to pay up to $699 in fees each (or up to $5.1 million) to file paperwork to reduce or eliminate their monthly payments for their federal student loans, through loan consolidation, forgiveness, or income-driven repayment plans.

The bureaus said that the U.S. Department of Education, however, offered these options to student loan borrowers for free. “Moreover, under the TSR, it is illegal to request or receive any fees for debt-relief services sold through telemarketing before the terms of the debt are altered or settled, and the consumer has made at least one payment pursuant to the new arrangement,” the agency stated.

The bureau also alleged that the defendants violated the TSR because they requested and received payments from consumers within a few days, or at the latest, within 30 days of their enrollment—before the terms of the debts were altered.

Consumer Financial Protection Bureau takes action against student-loan debt-relief business and its owners for taking illegal advance fees