The Consumer Financial Protection Bureau on Wednesday ordered a San Diego student debt relief company to shut its operations, cancel all contracts and cease participating in the industry.
The agency ordered Student Aid Institute and its CEO Steven Lamont to immediately stop charging customers any fees for its services and to halt all debt relief services. Lamont, who claimed on his LinkedIn profile to be a former ad executive, was ordered to pay a $50,000 penalty. He and the company have been permanently barred from the debt relief industry. Lamont could not be reached for comment.
“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,” CFPB Director Richard Cordray said in a press release. “These practices bear a disturbing resemblance to the mortgage crisis where distressed consumers were preyed upon with false promises of relief.”
The CFPB said that Student Aid “reaped millions of dollars in advance fees from thousands of consumers.”
The company allegedly charged consumers hundreds of dollars in upfront fees even though federal law requires that at least one debt be renegotiated, settled or reduced before a fee can be collected for debt relief services.
It also claimed to be affiliated with the Department of Education, which offers many plans without charging fees to help borrowers with federal student loans.
The secretary of education, John B. King Jr., lauded the consumer bureau’s vigilance in weeding out bad actors in the student loan arena.
“We will continue to work with CFPB to ensure that affected borrowers get the free help they deserve to manage their payments,” King said in the press release. “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.”
Despite being barred from the industry, Student Aid still has to prepare, process and mail paperwork to ensure student loan borrowers do not miss repayment benefits.
The Department of Education requires that student borrowers recertify their income-driven repayment plans every year and some of the plans come up for renewal within the next 30 days.