On December 13, 2022, the Ninth Circuit affirmed the grant of summary judgment by a  California federal district court to the Consumer Finance Protection Bureau (“CFPB”) in a civil enforcement action alleging that Armond Aria, the owner of Global Financial Support, Inc., mailed deceptive solicitations to current and prospective college students advertising a targeted program for assisting those students in applying for scholarships.  In affirming the district court’s ruling, the Ninth Circuit agreed with the district court’s holding that Aria was a “covered person” subject to the CFPB’s enforcement authority because his conduct involved “providing financial advisory services” to consumers. 

 Global mailed millions of solicitations to current and prospective college students that generally advised students to avoid taking out loans until they had applied to all available “free” financial aid programs.  The letters were accompanied by a form seeking the disclosure of demographic information that promised “to provide as many targeted financial aid opportunities as possible to each and every student,” in exchange for a processing fee of $59 to $78.  The only product or service that students received was a booklet with information about student financial aid that was not tailored to individual students.

The CFPB alleged in its enforcement action against Global and Aria that their conduct was deceptive because it misled students in various ways, including that Global would provide a program to assist them in applying for scholarships and match them to individually targeted scholarship opportunities.  A default judgment was entered against Global after it failed to secure counsel to appear and defend the business entity. 

The Ninth Circuit concluded that the district court had correctly rejected Aria’s argument that he was not a “covered person” subject to the CFPB’s authority because he merely provided nonfinancial advice on free, gift-based scholarships.  The Consumer Finance Protection Act defines a “covered person” as “any person that engages in offering or providing a consumer financial product or service” and lists ten categories of a “consumer financial products or service.”  The eighth category, which is relevant here, includes “providing financial advisory services… to consumers on individual financial matters….” 

 The Ninth Circuit provided three reasons for rejecting Aria’s argument that he did not provide “financial advisory services.”  First, it found that Aria was incorrect that scholarships are not financial in nature because they do not need to be repaid.  The Ninth Circuit indicated that the definition of “finance” contemplates raising funds, regardless of their origin, for college tuition.  Second, the evidence indicated that Aria’s advice extended beyond the topic of scholarships, covering the entire field of student financial aid.  Third, Aria held himself out as an expert in finance because his business  marketed itself  as offering advisory services on financial aid.

The Ninth Circuit also rejected Aria’s argument that the district court erred by failing to consider the net impression of the entirety of his solicitation materials when it determined they were deceptive.  The Ninth Circuit indicated that the district court had referenced the “net impression test” in its analysis.  Under that test, a solicitation may be likely to mislead by virtue of the net impression it creates even though the solicitation also contains truthful disclosures.  The Ninth Circuit also agreed with the district court’s reasons for concluding that the net impression of the solicitation was deceptive.

The Ninth Circuit refused to revisit the district court’s award of restitution in the amount of $4,738,028 and imposition of a $10 million civil penalty because it concluded that Aria had forfeited his challenges by not raising and preserving them in the proceedings below.