Federal Agency: Company Made Millions in College Loan Scam

WASHINGTON, DC–The Consumer Financial Protection Bureau (CFPB) announced on October 27 that it has taken action against a nationwide student financial aid scam that allegedly ripped off tens of thousands of students.

According to a CFPB press release, the culprits illegally charged millions of dollars in fees for bogus financial services.

The company operates under names including the “Student Financial Resource Center,” or the “College Financial Advisory,” but the federal complaint seeks to stop what it says are illegal business practices, and also get relief  for “harmed” consumers.

The agency's complaint identifies Armond Aria, as the owner of the entities perpetuating the alleged scheme. Aria also owns the parent company, a California corporation, called Global Financial Support, Inc.

“College Financial Advisory scammed thousands of students by masquerading as government agencies and other trusted organizations,” said CFPB Director Richard Cordray.

“Students and families were looking for information on how to pay for college, instead they were illegally charged millions of dollars for sham financial services. We will continue to take strong action against those who deceive consumers.”

The CFPB’s complaint details how Aria and the two businesses get away with running a deceptive scheme masquerading as a government or university-affiliated operation.

“The defendants allegedly send millions of deceptive letters to students and their families claiming to match them with targeted financial aid assistance programs for a fee,” reads the CFPB's press release.

But consumers don’t receive anything whatsoever in exchange for paying the fee which generates millions of dollars for the company.

The defendants take advantage of consumer uncertainty regarding the use of free federal financial aid resources, alleges the complaint.

The Department of Education’s Free Application for Federal Student Aid (FAFSA) program allows students to apply for college loans and grants at no cost. The Department of Education never charges fees to apply for its programs.

The agency accused the corporation of violating multiple laws in the lawsuit.

“The Bureau’s complaint alleges that Aria and his businesses violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against deceptive acts and practices by misleading consumers about their services. The complaint also alleges the defendants violated federal privacy law for failing to provide a required privacy notice.”

The CFPB asserts that the defendants tricked students and their families into actually thinking they were applying for financial aid services.

Since January 2011, Arias’ company allegedly issued millions of direct mail marketing letters to students using the "Student Financial Resource Center" name, and the "College Financial Advisory" name.

The letters are said to walk students through filling out and returning an application with a fee.  The fee ranged from $59 to $78, and was justified by "maximum merit and need-based financial aid programs.”

For its part, Aria’s company allegedly promised to conduct thorough searches to match students with customized financial aid opportunities, but never comes through on its promise.

Students either received nothing in exchange for sending back their applications and fee or got a basic booklet that failed to provide any custom or individualized advice.

The company also presented itself as having an affiliation with the government or academic institutions, the CFPB alleges.

The scheme used logos and seals that to made students think that its materials were sent by the government, according to the CFPB.

The company craftily used the name of the student’s university to make it appear like the letters were officially endorsed by the schools, alleges the complaint.

Moreover, the CFPB says the company created fear for students by making them feel like they’d lose financial aid opportunities if they did not act immediately and pressured students to “enroll and pay for services by creating a false sense of urgency by using fake deadlines and deceptive statements.”

According to the complaint, the company told students that they must return their application and payment by a specific date or lose out on their opportunity to receive any financial aid.  However, the deadlines were fake.

The CFPB says it wants the court to order the defendants to provide compensation to consumers hurt by the scheme and to pay penalties for illegal conduct.

The lawsuit in the U.S. Federal Court for the Southern District of California, and the agency noted that the complaint is not a “finding or ruling” that the defendants have actually broken the law.