November 18, 2020
Authored by: Douglas Thompson
Student Lending CFPB Enforcement:
Alleging Impermissible Debt Relief Service Advance Fees
Director Kraninger has outlined in various settings, the Bureau’s focus on protecting those often most vulnerable, including the elderly, military personnel and veterans, as well as students, sometimes collectively referred to special populations. Recently, the Bureau took aim at several businesses, which according to the CFPB’s complaint were exploiting students by charging impermissible advance fees in connection with purported debt relief services. We should expect further activity in 2021 with the change of administration, potential extension of certain COVID-19 pandemic-related student lending forbearance orders, and other potential student lending protection efforts.
The complaint asserts five causes of action under the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6102(c), 6105(d) (“TCFAPA”); the Telemarketing Sales Rule (“TSR”), 16 C.F.R. pt. 310; and the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, in connection with the marketing and sale of debt relief services. According to the complaint, “Defendants Performance SLC, LLC and Performance Settlement, LLC, along with their owner and manager Defendant Daniel Crenshaw, are engaging in debt relief activities that have harmed consumers nationwide by charging illegal advance fees, failing to make required disclosures, and engaging in deceptive sales practices.”
Penalties & Injunctive Relief Requested
In its filing announcement the CFPB stated that “Consumers would pay between $1,000 and $1,450 in fees to PSLC for it to file paperwork with [the U.S. Department of Education], even though student loan borrowers can do this themselves for free.” The Bureau claims “that PSLC had some consumers pay this prohibited upfront fee through high-interest financing from a third party.” The complaint seeks injunctive relief to prevent the potential on-going violations of the TSR and the CFPA; consumer “monetary relief including but not limited to the refund of monies paid, restitution, disgorgement or compensation for unjust enrichment, and payment of damages;” imposition of civil money penalties against Defendants, and an award of costs to the Bureau. The complaint alleges that “[f]rom 2016 to 2019, PSLC enrolled more than 6,500 customers in multiple states” and that certain “Trust Plan Customers paid more than $4,300,000 in fees to PSLC” and other customers “paid more than $4,900,000 in loan principal and interest” on allegedly improper loans arising from Defendants’ activities.