CFPB Sues Company and Owner for Alleged Student Financial Aid Scam

CFPB Sues Company and Owner for Alleged Student Financial Aid Scam

 by Barbara S. Mishkin

A new lawsuit filed by the CFPB in a California federal district court alleges that the defendants, a company and its individual owner, are engaged in a nationwide student financial aid scam. In addition to injunctive relief, the complaint seeks redress for harmed consumers and civil money penalties.

According to the CFPB’s complaint, the defendants contacted students and their families using letters and envelopes with images intended to create the false impression that the defendants were affiliated with the federal government or a college. The letters were accompanied by a form to be completed by the student or the student’s family to apply for financial aid and returned to the defendants with a processing fee. (The CFPB claims that the form looked visually similar to the Department of Education’s Free Application for Federal Student Aid and used similar terms.)

The defendants allegedly promised to use the information provided on the form to conduct extensive searches to match students with financial aid opportunities. The CFPB claims that, in exchange for sending the form and fee, consumers received “absolutely nothing” or received only “a generic booklet that is not tailored to the consumers’ circumstances.”  It also claims that the defendants created an artificial sense of urgency by telling consumers that they would lose their opportunity to receive student financial aid unless they returned the form and paid the fee by a specified deadline.

The CFPB alleges that the defendants’ conduct violated the CFPA’s UDAAP prohibition. It also alleges that by accepting a fee from a consumer, the defendants established a customer relationship that triggered the obligation to send an initial privacy notice under Regulation P but failed to provide such notice.

 Read additional articles at Ballard Spahr’s CFPB Monitor

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