The Consumer Financial Protection Bureau on Wednesday ordered Student Aid Institute Inc., a company accused of preying on student loan borrowers, to shut down, cancel all contracts and stop participating in the industry.
The feds accused the San Diego-based company of illegally charging borrowers advance fees of hundreds of dollars as well as an ongoing monthly fee before actually providing them with any help. The company also allegedly misrepresented the extent to which it could help borrowers and wrongfully implied it was affiliated with the Department of Education. The company and CEO Steven Lamont were ordered to pay a penalty, halt debt relief services and stop charging customers.
Outstanding student loan debt is hovering at $1.3 trillion. A website for Student Aid Institute appeared to be down late Wednesday. Attempts to reach the company weren’t immediately successful.
"We will continue to shut down illegal scams and address sloppy servicing practices that victimize consumers," CFPB director Richard Cordray said.The secretary of education, John B. King Jr., praised the CFPB'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 a 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."
The Education Department offers several plans to borrowers with federal student loans to make payments more affordable. These include options that allow struggling borrowers to 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 low-wage borrowers. The Education Department doesn’t charge any fees to apply for or enroll in these plans, for which many student loan borrowers qualify.