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CFPB Takes Action against Student Financial Aid Services for Illegal Recurring Billing Scheme
Monday, July 27, 2015 6:35 AM

The Consumer Financial Protection Bureau has filed a complaint and proposed consent order in federal court against Student Financial Aid Services, Inc. for illegal sales and billing practices.

The Bureau alleges that the company, which until recently operated FAFSA.com, lured in consumers with misleading information about the total cost of its subscription financial services and hit them with undisclosed and unauthorized automatic recurring charges. Under the proposed order, the company would halt illegal practices and pay $5.2 million, which would be distributed by the Bureau to harmed consumers.

According to the Bureau’s complaint, when consumers entered their payment information for certain financial advisory services, the company began to bill them for an annual subscription without the consumers’ knowledge or consent. These recurring charges typically ranged from $67 to $85 each year and were renewed annually. The company enrolled consumers in these annual subscriptions without adequate disclosures and imposed recurring fees without consumers’ authorization.

The Bureau’s complaint alleges that Student Financial Aid Services, Inc. violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair and deceptive acts and practices by misleading consumers about the recurring charges. The company violated the Electronic Fund Transfer Act by failing to get appropriate authorization for future electronic withdrawals from consumer accounts. Student Financial Aid Services, Inc. also allegedly engaged in deceptive telemarketing practices in violation of the Telemarketing Sales Rule.

Pursuant to the Dodd-Frank Act, the CFPB has the authority to take action against institutions or individuals engaging in unfair, deceptive, or abusive acts or practices. It also has the authority to take action against institutions or individuals that otherwise violate federal consumer financial laws. Under the terms of the proposed consent order filed, Student Financial Aid Services, Inc. would be required to:  

  • Pay $5.2 million in consumer relief. Student Financial Aid Services, Inc. would pay $5.2 million to the Bureau. The funds would be used to repay consumers who were allegedly illegally charged for unauthorized, recurring service fees.
  • End illegal sales and billing practices. Student Financial Aid Services, Inc. would be required to cancel all recurring, automatic charges. The company would also be prohibited from misrepresenting the cost or price of its products or services.
  • Pay civil money penalty. The company would also be required to pay a civil penalty of $1 to the CFPB’s Civil Penalty Fund. The Bureau 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 that determination has not yet been made.

To learn more details about CFPB's findings and enforcement actions, go to the CFPB Newsroom.

Review a copy of the complaint.

Review a copy of the proposed consent order.