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From Banking and Finance Law Daily, October 29, 2015

Phony services, affiliations, deadlines mark financial aid scam, CFPB says

By Andrew A. Turner, J.D.

A company is accused of running a nationwide student financial aid scam with false promises to match students and families with targeted financial aid assistance programs for a fee. The Consumer Financial Protection Bureau contends that the company tricked consumers into thinking they were applying for financial aid services, falsely represented an affiliation with the government or academic institutions, and pressured consumers with threats of losing financial aid opportunities.

The CFPB complaint in the U.S. District Court for the Southern District of California against Global Financial Support, Inc., operating under the names of College Financial Advisory and Student Financial Resource Center, and its owner, Armond Aria, contends that many consumers receive nothing in exchange for their fee. The CFPB alleges that the businesses violated the prohibition against deceptive acts and practices by misleading consumers about their services. The complaint also alleges the defendants violated federal privacy law for failing to provide a required privacy notice.

“Student Financial Resource Center and College Financial Advisory scammed thousands of students by masquerading as government agencies and other trusted organizations,” said CFPB Director Richard Cordray. “Students and families were looking for information on how to pay for college, instead they were illegally charged millions of dollars for sham financial services. We will continue to take strong action against those who deceive consumers.”

Business operation. The business ran a deceptive scheme to persuade high school seniors, enrolled college students, and their families to pay a fee to participate in a student financial aid “program,” according to the CFPB. Through the use of an official-looking seal, artificial filing deadlines, references to students’ universities, a “Student Aid Profile Form,” and a strategically worded letter, the CFPB says they exploit consumers’ unfamiliarity, anxiety, and confusion about the Free Application for Federal Student Aid and the student financial aid process generally.

Services. The letters allegedly instruct students to fill out and return an application and a fee—ranging from $59 to $78—to apply for the maximum merit- and need-based financial aid programs. In reality, the complaint claims, consumers either receive nothing in exchange for sending in their application and fee, or they get a generic booklet that fails to provide individualized advice.

Affiliations. According to the CFPB, the company uses logos and seals to make consumers think that its materials are sent or endorsed by the government. The company includes the name of the student’s university to give the impression that the letter is endorsed by the student’s university.

Deadlines. The company allegedly creates a false sense of urgency by saying that the opportunity to receive student financial aid will be lost based on fake application and fee deadlines.

Relief sought. The CFPB is seeking a halt to the unlawful practices alleged in the complaint, restitution to harmed consumers, and penalties for their illegal conduct.

Companies: College Financial Advisory; Global Financial Support, Inc.; Student Financial Resource Center

MainStory: TopStory CaliforniaNews CFPB EnforcementActions Loans Privacy UDAAP

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