WASHINGTON — The Consumer Financial Protection Bureau (CFPB) took action to halt a student loan debt relief scam that illegally tricked borrowers into paying fees for federal loan benefits and misrepresented to consumers that it was affiliated with the Department of Education.
The CFPB is ordering the student debt relief company, Student Aid Institute, Inc., and its chief executive officer, Steven Lamont, to pay a penalty, halt debt relief services, and stop charging affected customers. The CFPB is also permanently barring the company and Lamont from the debt relief industry.
“We see more and more companies and websites demanding large upfront fees to help student loan borrowers enroll in income-driven plans that are available for free,” said CFPB Director Richard Cordray. “These practices bear a disturbing resemblance to the mortgage crisis where distressed consumers were preyed upon with false promises of relief. We will continue to shut down illegal scams and address sloppy servicing practices that victimize consumers.”
“We appreciate CFPB’s continued vigilance and leadership in weeding out those who seek to prey on struggling student loan borrowers,” said U.S. Secretary of Education John B. King Jr. “We will continue to work with CFPB to ensure that affected borrowers get the free help they deserve to manage their payments. To all the Americans out there working hard to keep up with your student loan payments, please remember: you never have to pay for help.”
Student Aid Institute is a debt relief services company that offers to reduce consumers’ student loan payments. The company is headquartered in San Diego, and its chief executive officer is Steven Lamont.
The Department of Education offers numerous plans to borrowers with federal student loans to make payments more affordable. These include options that let struggling borrowers set their monthly payment based on their income. Monthly payments under these plans can be as low as zero dollars per month for unemployed or very low-wage borrowers. The Department of Education does not charge any fees to apply for or enroll in these plans, for which many student loan borrowers qualify.
Student Aid Institute marketed and advertised debt relief services to struggling student loan borrowers. The company deceived customers about the benefits of their services and misrepresented that fees were required to participate in federal student loan programs when those programs were, in fact, free. The company ultimately reaped millions of dollars in advance fees from thousands of consumers, the CFPB said.