Consumers burdened with student loan debt are a tempting target for scam artists. One company accused of bring an integral cog in such a scheme has been ordered to pay $11 million, including $8.7 million in refunds to consumers.
“Too often, bad actors take advantage of student loan borrowers and others who are seeking to get out of debt,” said Consumer Financial Protection Bureau Director Rohit Chopra, in a news release. “Our law enforcement action bans the facilitators and their ringleaders for their illegal acts.”
Debt-relief payment-processors RAM Payment and Account Management Systems (AMS) were accued of collecting debt-relief fees from consumers, lying to consumers about when the fees would be paid to debt-relief companies, and sending illegal advance fees to debt-relief companies before they were legally allowed to do so.
They also failed to return funds to consumers who cancelled student-loan debt relief agreements, as required by law, CFPB said.
270,000 consumers were affected
Based in Knoxville, Tennessee, AMS and RAM Payment provided account maintenance and payment-processing services to about 270,000 consumers across the U.S. who were enrolled in debt relief programs.
Providers of account-maintenance and payment-processing services to debt-relief companies are supposed to be independent, third-party companies that hold fees until debt-relief companies are entitled to them under the law.
Besides a $3 million fine, the company and its owners must refnd $8.7 million to consumers who were enrolled in student loan debt relief plans. The company and its owners are also banned from the debt-relief payment-processing and account maintenance industry.