The Consumer Financial Protection Bureau has sued members of a student debt relief network, settling with some of them, over violations of the Telemarketing Sales Rule.
The agency filed a complaint in the federal district court for the Central District of California against GST Factoring, Inc., which runs a student-loan debt-relief business in Texas, and two of its owners, Rick Graff and Gregory Trimarche, as well as Champion Marketing Solutions, LLC, a customer service and marketing company, and its owner, Scott Freda. It also filed suit against four attorneys, California attorneys Amanda Johanson and Jacob Slaughter, Arizona attorney David Mize, and Florida attorney Daniel Ruggiero.
The CFPB alleges that the companies, their owners, and the attorneys were part of a nationwide student loan debt relief operation that charged thousands of consumers approximately $11.8 million in illegal upfront fees in violation of the Telemarketing Sales Rule. Concurrent with the complaint, the bureau and four of the defendants filed proposed stipulated final judgments and orders to resolve the claims against them. If entered by the court, the orders will ban Trimarche, Slaughter, Mize, and Ruggiero from participating in certain activities, impose monetary judgments to provide redress to about 2,600 consumers totaling approximately $11.8 million, and impose a civil money penalty.
The defendants allegedly violated the TSR’s prohibition on requesting or receiving advance fees for debt-relief services, or substantially assisted others in violating this prohibition, by charging illegal advance fees purportedly to renegotiate student loan debt from 2015 through the present.
As the complaint alleges, the defendants did not wait to complete their work for consumers, and instead charged fees right away by arranging for monthly payments over the course of years that began at or just after consumers signed up for defendants’ services. Using telemarketing campaigns, defendants led consumers to believe that they were working solely with an attorney, but in fact, the fees—which were as large as about 40 percent of the consumers’ outstanding student-loan debt—went to defendant GST Factoring, which distributed the funds to the participants in the scheme.
The complaint also alleges that consumers were encouraged to stop paying their student loans all together.
If entered by the court, the proposed orders will permanently ban Trimarche from providing debt-relief services and telemarketing any consumer financial product or service and impose permanent debt-relief bans on Slaughter, Mize, and Ruggiero. The full judgment amount will be suspended upon the settling defendants’ paying a portion of the redress based on their demonstrated inability to pay the full amount. Each settling defendant will also pay a $1 civil money penalty to the bureau.