Student Loan Borrowers Could Benefit From These Fines; Check This Out!

GST Factoring, a student-debt relief company, has been fined by the Consumer Financial Protection Bureau (CFPB) for charging illegal upfront fees for student loan debt relief services.

Student loan borrowers could receive payments from fines. (Photo: FORBES)

2,600 Student Loan Borrowers Could Benefit from the Penalty

The CFPB has ordered the company to pay a $30m penalty and return $11m in illegally charged fees to 2,600 borrowers. The agency had filed a complaint against GST Factoring in 2020 and alleged that the company and the attorneys working with them charged $11.8m in illegal fees to borrowers with private student debt.

The company and attorneys were found to have led consumers to believe that they were working solely with an attorney but in fact, the fees, which were as large as 40% of the consumers’ outstanding student-loan debt, went to GST Factoring, according to a published article in Business Insider.

The company distributed the funds to the participants in the scheme. The complaint further alleged that consumers were encouraged to stop paying their student loans, with defendants claiming that being behind in payments would make lenders more likely to agree to a settlement. The court order also bans the company from engaging in any debt relief services going forward.

READ ALSO: Student Debt Relief Plan: 53% Of Borrowers Need Loans Forgiven

CFPB Cracked Down Student-Debt Relief Companies

This is not the first time the CFPB has cracked down on predatory behavior by student-debt relief companies. In December, the agency accused five companies of violating the Telemarketing Sales Rule by deceiving borrowers about the services they offer and collecting advance fees for help getting debt relief. About 23,000 borrowers affected by those companies received $19m in payments.

Student-debt relief companies often offer borrowers help with repayment, but oftentimes they come with undisclosed fees. The Education Department made clear that borrowers should not have to pay anything for assistance with relief, after announcing President Joe Biden’s plan to cancel up to $20,000 in student debt for federal borrowers in August.

The department released guidance to help borrowers avoid scams as the relief plays out. However, the broad relief is currently blocked due to conservative lawsuits, and the Supreme Court is expected to issue a final decision on the relief’s legality by June.

READ ALSO: Student Debt Relief Plan: Relief For Borrowers Misled By Colleges