WASHINGTON—The Consumer Financial Protection Bureau filed a complaint and proposed consent order in federal court against Student Financial Aid Services, Inc. for illegal sales and billing practices.
The Bureau alleges that the company, which until recently operated as FAFSA, lured in consumers with misleading information about the total cost of its subscription financial services and hit them with undisclosed and unauthorized automatic recurring charges. Under the proposed order, the company would halt illegal practices and pay $5.2 million, which would be distributed by the Bureau to harmed consumers.
“Student Financial Aid Services, Inc. made millions of dollars at the expense of consumers through its illegal recurring payment scheme,” said CFPB Director Richard Cordray. “Our enforcement action will put money back in the pockets of consumers who were misled while seeking to access federal student aid.”
Student Financial Aid Services, Inc. (SFAS) is based in Sacramento, California. The company has operated websites and related call centers, where it offers fee-based assistance to consumers filling out the federal government’s Free Application for Federal Student Aid (FAFSA). These websites were not at that time affiliated with the federal government’s FAFSA program.
According to the Bureau’s complaint, when consumers entered their payment information for certain financial advisory services, the company began to bill them for an annual subscription without the consumers’ knowledge or consent. These recurring charges typically ranged from $67 to $85 each year and were renewed annually. The company enrolled consumers in these annual subscriptions without adequate disclosures and imposed recurring fees without consumers’ authorization.
The Bureau’s complaint alleges that Student Financial Aid Services, Inc. violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair and deceptive acts and practices by misleading consumers about the recurring charges. The company violated the Electronic Fund Transfer Act by failing to get appropriate authorization for future electronic withdrawals from consumer accounts. Student Financial Aid Services, Inc. also allegedly engaged in deceptive telemarketing practices in violation of the Telemarketing Sales Rule.