The Consumer Financial Protection Bureau issued an enforcement action against debt-relief payment-processors RAM Payment and Account Management Systems for issuing illegal advance fees and failing to return funds to consumers when required to.
The CFPB is ordering RAM Payment, AMS, and AMS co-founders Gregory Winters and Stephen Chaya to refund $8.7 million to consumers, and to pay a $3 million civil money penalty over violations of the Telemarketing Sales Rule and the Consumer Financial Protection Act.
The action accuses the companies of lying to consumers about when debt-relief fees collected from consumers would be paid to debt-relief companies and for 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 canceled student-loan debt relief agreements, as required by law, the bureau said.
The companies collected fees from consumers and provided those fees to student-loan debt-relief companies before the consumers’ debts had been renegotiated or a payment was made pursuant to a new debt settlement, as required by law, the bureau said. They also disbursed illegal upfront debt-relief fees that were ostensibly for add-on services marketed by debt-relief companies as legal plan memberships, according to the order.
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.
The respondents paid illegal commissions to third-party marketing companies connected with debt-relief companies for referrals, the bureau said, also in violation of rules designed to ensure that account maintenance services are independent.
Winters and Chaya also co-owned a financing company, Account Connect Limited which, for certain debt-relief companies, advanced about 65 percent of the fees that the companies expected to receive from consumers. ACL recouped these advances from payments consumers made into accounts maintained by AMS and RAM Payment, and the shared ownership of the three companies wasn’t disclosed to consumers, the bureau said.
“Too often, bad actors take advantage of student loan borrowers and others who are seeking to get out of debt,” said CFPB Director Rohit Chopra. “Our law enforcement action bans the facilitators and their ringleaders for their illegal acts.”
Based in Knoxville, Tenn., 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.
Winters and Chaya co-founded AMS, and RAM Payment acquired AMS in 2019. After the acquisition, Winters and Chaya continued to manage AMS and RAM Payment, and they exercised “substantial control” over the companies’ business practices, the CFPB said.