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From Banking and Finance Law Daily, July 23, 2015

Student financial aid servicer gets an ‘F’, lawsuit from CFPB

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has filed a complaint against Student Financial Aid Services, Inc. (SFAS) for alleged illegal sales and billing practices. The bureau alleges unfair and deceptive acts or practices on the part of the company for luring in consumers with misleading information about the total cost of its subscription financial services and then charging them with undisclosed and unauthorized automatic recurring charges. Under the proposed consent order, SFAS would stop its illegal practices and pay $5.2 million to consumers.

“Student Financial Aid Services, Inc. made millions of dollars at the expense of consumers through its illegal recurring payment scheme,” said CFPB Director Richard Cordray. “Our enforcement action will put money back in the pockets of consumers who were misled while seeking to access federal student aid.”

Company background. SFAS is a company based in Sacramento, Calif. that has operated websites, including and, and related call centers, that offered fee-based assistance to consumers filling out the federal government’s Free Application for Federal Student Aid (FAFSA). These websites were not at that time affiliated with the federal government’s FAFSA program, according to the bureau’s complaint. When consumers entered their payment information for financial advisory services, the company began to bill them for an annual subscription without the consumers’ knowledge or consent. The CFPB charges that the company enrolled consumers in these annual subscriptions without adequate disclosures and imposed recurring fees without consumers’ authorization.

Violations. The bureau’s complaint charges SFAS with violating Sections 1031 and 1036 of the Consumer Financial Protection Act (12 U.S.C. §§ 5531 and 5536). The company also allegedly violated the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101 et seq., and its implementing rule, the Telemarketing Sales Rule (16 C.F.R. Part 310). Initiating recurring, preauthorized electronic fund transfers from consumers’ accounts without the required written authorization earned the company a charge of violating the Electronic Fund Transfer Act (15 U.S.C. § 1693e(a)) and implementing Regulation E (12 C.F.R. § 1005.10(b)).

Proposed consent order. In addition to halting illegal practices and paying $5.2 million in restitution to consumers harmed by those practices, the proposed consent order requires SFAS to pay a $1 civil money penalty to the CFPB’s Civil Penalty Fund. The bureau states that it is not seeking a larger penalty because of the company’s limited financial resources after repaying harmed consumers. By requiring the company to pay a $1 penalty, victims of the company’s illegal practices may be eligible for additional relief from the CFPB Civil Penalty Fund in the future, although the CFPB stresses that determination has not yet been made.

Companies: Student Financial Aid Services, Inc.

MainStory: TopStory CaliforniaNews CFPB EnforcementActions Loans UDAAP

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