District Court issues judgment against student debt relief operation
On May 24, the U.S. District Court for the Central District of California entered a stipulated final judgment and order against an individual defendant who participated in a deceptive debt-relief enterprise operation. As previously covered by InfoBytes, in 2019, the CFPB, along with the Minnesota and North Carolina attorneys general, and the Los Angeles City Attorney (together, the “states”), announced an action against the student loan debt relief operation for allegedly deceiving thousands of student-loan borrowers and charging more than $71 million in unlawful advance fees. In the third amended complaint, the Bureau and the states alleged that since at least 2015 the debt relief operation violated the CFPA, TSR, FDCPA, and various state laws by charging and collecting improper advance fees from student loan borrowers prior to providing assistance and receiving payments on the adjusted loans. In addition, the Bureau and the states claimed that the debt relief operation engaged in deceptive practices by misrepresenting, among other things: (i) the purpose and application of fees they charged; (ii) their ability to obtain loan forgiveness for borrowers; and (iii) their ability to actually lower borrowers’ monthly payments. Moreover, the debt relief operation allegedly failed to inform borrowers that it was their practice to request that the loans be placed in forbearance and also submitted false information to student loan servicers to qualify borrowers for lower payments. Under the terms of the final judgment, the individual defendant must pay a $483,662 civil money penalty to the Bureau.