Bureau alleges Texas student loan firm collected nearly $12 million in illegal fees – but redress payment suspended for some

A Texas student-loan debt relief company, two of its owners, a marketer and her company, and attorneys in three states are named in a complaint for charging borrowers nearly $12 million in illegal upfront fees, the federal consumer financial protection agency said Monday.

However, the Consumer Financial Protection Bureau (CFPB) said, rather than collect redress for the 2,600 consumers in the full amount of $11.8 million in illegal fees charged, for some of the defendants, the “judgment amount will be suspended upon the settling defendants’ paying a portion of the redress based on their demonstrated inability to pay the full amount.”

Each settling defendant will also pay a $1 civil money penalty to the CFPB, the agency said.

This is the second time in a week that the agency has announced an action it has taken against a financial firm for illegally reaping millions in fees but agreed not to seek repayment of the fees since the defendants demonstrated they could not pay the full amount of redress.

In the latest case, the bureau said it filed the complaint against GST Factoring, Inc., which runs a student-loan debt-relief business in Texas, and two of its owners, Rick Graff and Gregory Trimarche, as well as Champion Marketing Solutions, LLC, a customer service and marketing company, and its owner, Scott Freda. The bureau also named four attorneys in three states in the complaint: California attorneys Amanda Johanson and Jacob Slaughter, Arizona attorney David Mize, and Florida attorney Daniel Ruggiero.

“The Bureau alleges that the companies, their owners, and the attorneys were part of a nationwide student-loan debt-relief operation that charged thousands of consumers saddled with private student-loan debt approximately $11.8 million in illegal upfront fees in violation of the Telemarketing Sales Rule (TSR),” the bureau said in a release.

The agency said that, concurrent with the complaint, it and four of the defendants filed proposed stipulated final judgments and orders to resolve the claims against them. “If entered by the court, the orders will ban Trimarche (an owner of GST Factoring), and attorneys Slaughter, Mize, and Ruggiero from participating in certain activities, impose monetary judgments to provide consumer redress totaling approximately $11.8 million, and impose a civil money penalty.”

However, the agency said, that full judgment amount will be suspended upon the settling defendants’ paying a portion of the redress based on their demonstrated inability to pay the full amount. The $1 CMP will also be forthcoming from the four.

As for the remaining defendants, the bureau said its lawsuit would continue to proceed against defendants GST Factoring, Champion Marketing Solutions, Graff (another owner of GST Factoring), Freda (owner of Champion Marketing), and Attorney Johanson. The complaint seeks redress to consumers, an injunction, and the imposition of civil money penalties against them, the bureau stated.

Last week, the agency announced a settlement with owners and officers of Timemark, Inc., a Deerfield Beach, Fla., firm that provides debt-relief services to consumers with federal student-loan debt. The bureau said its 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 firm’s officers 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.”

Consumer Financial Protection Bureau sues student-loan debt-relief operation for taking illegal advance fees and settles with some participants