Debt relief provider charged illegal advance fees and misled student loan borrowers

Today, the Consumer Financial Protection Bureau (CFPB) took action against Western Benefits Group for charging illegal advance fees for student loan debt relief services and misrepresenting to consumers that advance fees would go toward paying down their loans. The CFPB found Western Benefits also misrepresented that it was affiliated with and endorsed by the Department of Education, and that the company would help consumers consolidate student loans, lower consumers’ monthly student loan payments, or obtain loan cancellation. The CFPB is ordering Western Benefits to permanently cease operations and pay a $400,000 penalty to be deposited in the CFPB’s victims relief fund. The order also rescinds all existing agreements with consumers.

“The burden of student debt has spawned scores of scams,” said CFPB Director Rohit Chopra. “Student loan borrowers should steer clear of outfits claiming to be affiliated with the Department of Education.”

Western Benefits Group is a nonbank telemarketer headquartered in Pleasanton, California, that has offered debt relief services since at least 2016.

In January 2016, Western Benefits began to market, sell, and administer student loan debt relief services to consumers. Western Benefits used lead generators to increase its inbound telemarketing calls. The lead generators marketed debt relief services to consumers through email marketing campaigns and web campaigns.

The CFPB found Western Benefits violated federal law by:

• Charging fees regardless of success in loan relief: Western Benefits required consumers to sign a contract that imposed installment fees, which were collected before negotiating debt relief on their behalf. For example, Western Benefits typically charged between $99 to $199 to prepare and submit a forbearance application to the Department of Education on a consumer’s behalf and collected additional monthly fees from consumers who enrolled in its services.

• Misrepresenting how fees would be applied: Western Benefits told consumers that fees they paid would be applied toward paying off their student loans. In fact, the advance fees were often not used to pay off the student loans.

• Misleading consumers into thinking their services would lower debt: Western Benefits claimed it would help consumers consolidate their student loans, would help lower monthly loan payments, and would help consumers achieve loan forgiveness. In many instances, the company did not fulfill any of these claims.

Enforcement Action

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial laws, including engaging in unfair, deceptive, or abusive acts or practices. The CFPB found that Western Benefits violated the Telemarketing Sales Rule by requesting or receiving unlawful advance fees and violated the Telemarketing Sales Rule and Consumer Financial Protection Act of 2010 by misrepresenting material aspects of their debt relief service.

The order requires Western Benefits to:

• Permanently cease operations: Western Benefits can no longer own, operate, or promote any type of student loan debt relief service.

• Pay a $400,000 fine: Western Benefits will pay a $400,000 penalty to the CFPB’s victims relief fund. The CFPB will use available funds to provide compensation to borrowers harmed by the company’s illegal conduct.

The order also rescinds all existing agreements with consumers such that all agreements related to the student loan debt relief services entered into through the date of the order are void effective immediately.

Read today’s order.

The CFPB has resources for student loan borrowers needing more information. Consumers can also submit complaints about financial products or services by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees of companies who believe their company has violated federal consumer financial laws are encouraged to send information about what they know to whistleblower@cfpb.gov.