$11 million in consumer redress and civil money penalties were assessed Wednesday against debt-relief payment processors, and co-founders of one of the firms, the federal consumer financial protection agency said Wednesday.
In a release, the agency said the fine results from the Knoxville, Tenn.-based firms — RAM Payment and Account Management Systems (AMS), as well as its co-founders, Gregory Winters and Stephen Chaya – for collecting debt-relief fees from consumers, allegedly lying to consumers about when the fees would be paid to debt-relief companies, and sending possibly illegal advance fees to debt-relief companies before they were legally allowed to do so.
The agency also said RAM Payment, AMS and its founders also allegedly failed to return funds to consumers who cancelled student-loan debt relief agreements, as required by law.
The bureau said it is ordering RAM Payment, AMS, Winters, and Chaya to pay more than $11 million in consumer redress and civil money penalties.
According to CFPB, AMS and RAM Payment provided account maintenance and payment-processing services to about 270,000 consumers across the U.S. who were enrolled in debt relief programs. Winters and Chaya co-founded AMS, the agency said, which. RAM Payment acquired in 2019. After the acquisition, Winters and Chaya continued to manage AMS and RAM Payment, and they exercised substantial control over the companies’ business practices, the bureau said.
The agency said its investigation found that the respondents violated the Telemarketing Sales Rule and the Consumer Financial Protection Act (CFPA). The firm and founders, the agency alleged, assisted student-loan and traditional debt-relief companies in requesting or accepting advance fees for debt-relief services, misrepresented their payment-processing actions to consumers before disbursing fees to student-loan debt-relief companies, and unfairly disbursed unearned fees for student-loan debt-relief services after consumers had unenrolled from or canceled the services.
CFPB asserted that, under the law, “providers of account-maintenance and payment-processing services to debt-relief companies are supposed to be independent, third-party companies that hold fees until debt-relief companies are entitled to them under the law.”
The CFPB called the firms’ and founders activities a “scam,” and said its action against them addressed unlawful collection, processing, and disbursement of fees; deception of consumers about the fees they paid, and; paying companies for referrals.
More specifically, the bureau is requiring the respondents to refund $8.7 million to consumers enrolled in student-loan debt-relief services; issuing industry bans against the firms and individuals, and; requiring the respondents to pay a $3 million fine.