In its third lawsuit filed under the leadership of Acting Director Uejio, the CFPB, earlier this week, sued Student Loan Pro (SLP), a student loan debt relief company, its owner, and its manager, for alleged violations of the Telemarketing Sales Rule (TSR) and the Consumer Financial Protection Act.  The CFPB’s complaint, which was filed in a California federal district court, also names FNZA Marketing, LLC (FNZ) as a relief defendant.  

According to the complaint, from 2015 to 2019, SLP, Judith Noh, SLP’s owner, and Syed Giliani, SLP’s “manager and owner-in-fact,” charged unlawful advance fees to borrowers to file paperwork on their behalf to access free debt-relief programs available to consumers with federal student loans.  The CFPB alleges that Noh formed FNZA, which conducted no business and provided no services to SLP, and that Giliani transferred advance fees received by SLP to FNZA’s bank account and withdrew the fees to pay his personal expenses.  It also alleges that in 2017, SLP settled an investigation conducted by the Washington Attorney General concerning fees charged by SLP and that the settlement required the payment of restitution to consumers. 

The complaint charges SLP, Noh, and Giliani with engaging in abusive telemarketing acts or practices in violation of the TSR through SLP’s acceptance of advance fees and Noh’s and Giliani’s knowing or reckless disregard of SLP’s unlawful acceptance of advance fees.  Noh and Giliani are also charged with violating the TSR by assisting and facilitating SLP’s TSR violations.  In addition, the complaint charges SLP, Noh, and Giliani with violating the CFPA based on their alleged TSR violations.  The complaint seeks injunctive relief, consumer redress, and civil money penalties against SLP, Noh, and Gilani, and seeks disgorgement from FNZ of the funds it received from SLP. 

Having been the target of numerous CFPB lawsuits under the leadership of former Director Cordray, student debt relief companies continued to be a CFPB target under the leadership of former Director Kraninger.  As more distressed borrowers seek to modify student loans and other debt when current pandemic-related moratoriums end, we expect the CFPB under its new leadership to increase its scrutiny of student debt relief companies as well as companies offering debt relief for other types of credit.  

Student debt relief companies have also been a continuing FTC target.  In addition, last month, the California Department of Financial Protection and Innovation (DFPI) announced that it had launched an investigation into whether student debt relief companies operating in California are engaging in illegal conduct under the California Consumer Financial Protection Law and Student Loan Servicing Act (SLSA).  Under the SLSA, “servicing” includes “[i]nteracting with a borrower related to that borrower’s student loan, with the goal of helping the borrower avoid default on his or her student loan.”  In what appears to be a novel reading of the term “servicing” by a state regulator, the DFPI indicated that debt relief companies acting as intermediaries between student loan borrowers and their lenders or servicers must be licensed under the SLSA.