Debt relief service providers sometimes give sound advice to Texas residents who are struggling to make ends meet, but many of the business offering these services callously take advantage of those with financial difficulties. One such company, the California-based Student Aid Institute, was shut down by the Consumer Financial Protection Bureau for a raft of violations on March 30, and the independent federal watchdog agency also held the company’s CEO accountable.
According to the CFPB, Student Aid Institute misled debtors by claiming to be affiliated with the Department of Education and exaggerating the benefits of its services. The company is said to have violated telemarketing rules by charging upfront fees and running afoul of federal regulations by not providing their clients with privacy notices. In addition to ceasing operations, the company agreed to pay a $50,000 fine and cancel its customers’ contracts.
The CFPB has pursued cases against debt relief providers on several occasions for charging illegal fees and deceiving the public, and also targeting the senior executives of these businesses is becoming an increasingly common tactic. The CFPB says that managers or owners of debt relief companies are held responsible to prevent them from engaging in similar behavior in the future. The March 30 CFPB consent order dealing with Student Aid Institute prohibits the company’s CEO from offering debt relief services in the future or working for another company in the field.
Attorneys with experience in this area will likely welcome this CFPB action. Unlike for-profit debt relief service providers, attorneys are bound by a strict code of ethics, and they must act with the best interests of their clients in mind when recommending a debt settlement organization.