Corporate Counsel Daily, Student loan debt-relief company settles CFPB’s charges of unlawful, deceptive conduct, (May 21, 2024)

By Justin Marcus Smith, J.D.

Western Benefits Group, in operation since at least 2016, agreed to end its operations without admitting or denying any wrongdoing.

The Consumer Financial Protection Bureau (CFPB) announced it took action against Western Benefits Group, LLC (WBG), a putative student loan debt-relief company based in Pleasanton, California, for having allegedly misrepresented that it would credit advance fees it received from student loan borrowers to the borrowers’ loan balances. Without admitting or denying any wrongdoing, WBG agreed to the issuance of a consent order, under § 1053 of the Consumer Financial Protection Act (CFPA), 12 U.S.C. § 5563, and an accompanying stipulation, in the interest of compliance and resolution of the CFPB’s administrative action against it. The company will end operations and pay a $400,000 penalty to be deposited in the CFPB’s victims relief fund. The CFPB said the advance fees paid to WBG affected about 6,000 consumers (Western Benefits Group, LLC, CFPB No. 2024-CFPB-0003 (May 20, 2024)).

Violations identified. The consent order contended the CFPB had identified violations of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1)(B); and, deceptive marketing practices and advance fees in violation of the Telemarketing Sales Rule (TSR), 16 C.F.R. §§ 310.3(a)(2)(iii), (a)(2)(x), and § 310.4(a)(5)(i).

Consent order. WBG entered into a consent order requiring it to:

1. permanently cease operations within 45 days;

2. pay a $400,000 fine to the CFPB victims relief fund; and

3. relinquish control of all funds received from consumers.

Underlying allegations. According to the CFPB, the so-called “First Work” advance fees ranged up to $159.95, plus a $35 monthly fee. The advance fees allegedly affected nearly 6,000 consumer borrowers. The alleged aggregate harm was almost $1 million. WBG also charged $99 to $199 for preparing Department of Education forbearance applications. The CFPB said WBG collected fees like these before doing any debt settlement work on behalf of the affected consumers. The CFPB cited that Section 310.4(a)(5) of the TSR prohibits telemarketers or sellers of debt-relief services from requesting or receiving payment of advance fees, as the regulation defined the various terms.

According to the CFPB, WBG had also engaged in various other misrepresentations, including that it would help consumers consolidate their loans, lower their monthly payments, and obtain loan cancellations. The CFPB said WBG even misrepresented that it was affiliated with and endorsed by the Department of Education.

Reporting requirements. WBG is to identify points of contact for CFPB, identify and describe all of its businesses, and describe all of its former means of advertising, marketing, and sales. It is also to keep and be able to produce all records necessary to demonstrate compliance with the consent order and to comply, under potential penalty of perjury, with future written CFPB requests for documentation.

Director statement. CFPB Director Rohit Chopra warned that the burden of student loan debt has “spawned scores of scams” and that student loan borrowers “should steer clear of outfits claiming to be affiliated with the Department of Education.”

Companies: Western Benefits Group, LLC

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