On December 3, the CFPB filed a proposed settlement to resolve a long running lawsuit against a student loan relief company and its owner (collectively, the “Defendants”). The settlement bars the company from offering or providing debt settlement products. In addition, the Defendants must pay $2,000 in civil monetary penalties, an amount determined based on their inability to pay more.
Under the 2021 lawsuit, the Bureau alleged that the Defendants, along with the company’s manager and owner-in-fact, unlawfully collected nearly $3.5 million in advance fees from approximately 3,300 consumers for access to free federal debt-relief programs, in violation of the Federal Trade Commission’s Telemarketing Sales Rule (TSR). The Bureau’s claims against the manager and owner-in-fact remain pending.
Under the TSR, sellers and telemarketers are prohibited from requesting or receiving advance fees for any debt-relief service until they renegotiate, settle, reduce, or otherwise alter the terms of at least one of a consumer’s debts and the consumer has made at least one payment on such altered debt. According to the Bureau, Defendants’ advance-fee violations cost approximately 3,300 consumers nearly $3.5 million in advance fees.
Putting It Into Practice: Questionable student loan debt relief practices have been a focal point for both federal and state regulators, with the TSR and the Impersonation Rule (effective since April 2024) serving as key enforcement tools (see discussions of previous federal and state enforcement actions here, here, and here). Noncompliance with these regulations can lead to severe consequences, including substantial fines and prohibitions on further related business activities.