Business & Real Estate

Sacramento firm that helps secure student financial aid will pay $5.2 million settlement

While denying wrongdoing, Sacramento-based Student Financial Aid Services Inc. will pay $5.2 million to settle federal Consumer Financial Protection Bureau allegations of “illegal sales and billing practices,” the bureau announced Thursday.

The independent U.S. government agency alleges that the local company, which until recently operated, lured in consumers with “misleading information about the total cost of its subscription financial services and hit them with undisclosed and unauthorized automatic recurring charges.”

More than 100,000 consumers were affected by the company’s practices, the bureau claims.

Under the complaint and proposed consent order filed Thursday in federal court, the bureau said the Sacramento firm has agreed to halt past practices and pay $5.2 million, which the bureau said would be distributed to affected consumers.

“Student Financial Aid Services Inc. made millions of dollars at the expense of consumers through its illegal recurring payment scheme,” CFPB Director Richard Cordray said in a statement. “Our enforcement action will put money back in the pockets of consumers who were misled while seeking to access federal student aid.”

In a formal statement responding to the bureau’s announcement, SFAS insisted on Thursday that it “did nothing illegal or wrong – and the CFPB provided no evidence to support any of its claims regarding alleged illegal or unethical activity. SFAS settled these unsubstantiated allegations to avoid protracted litigation. SFAS is not aware of a single consumer complaint to the CFPB about its services.”

Established in 1991, SFAS bills itself as the nation’s oldest fee-based provider of preparation and assistance services related to the Free Application for Federal Student Aid (FAFSA).

The bureau alleges, however, that when consumers entered payment information for certain financial advisory services, SFAS began to bill them for an annual subscription without the consumers’ knowledge or consent. The bureau said the recurring charges typically ranged from $67 to $85 each year.

The bureau’s complaint alleges SFAS violated federal prohibitions against unfair and deceptive acts and practices by misleading consumers about the recurring charges, and by failing to get authorization for future electronic withdrawals from consumer accounts.

SFAS also engaged in deceptive telemarketing practices, the bureau said.

SFAS said that it “has helped tens of thousands of low-income students on a pro bono basis with services that help navigate government applications that are every bit as complicated and confusing as tax forms.”