Thousands of student-loan borrowers are set to receive payments following allegations of illegal behavior by a California-based debt-relief business. On Thursday, the Consumer Financial Protection Bureau (CFPB) announced that 8,571 borrowers charged by Performance SLC would receive $10.9 million in payments.
The CFPB filed a complaint against Performance in 2020, accusing the company of charging borrowers approximately $9.2 million in “illegal upfront fees.” The complaint also claimed that the company violated the Consumer Financial Protection Act of 2010 by using misleading tactics to convince borrowers to sign up for free debt-relief services offered by the Education Department.
Performance partnered with a third-party company to help borrowers pay a $1,450 fee for the debt-relief services, extending loans to customers that appeared on their credit reports. Borrowers were expected to make payments on the loan for three years, “typically in the amount of $40 or $50 per month,” according to the complaint. The borrowers needed clarification about the loan payments, believing that the money would pay their student debt and that their student debt would be forgiven at the end of the three-year term.
Performance denied any wrongdoing but agreed to a settlement that banned the company from engaging in debt-relief services in the future. The CFPB said affected borrowers would begin receiving checks in the mail on Thursday through Rust Consulting, which works with the agency to distribute funds.
This isn’t the first time that the CFPB has addressed such issues. In 2022, the agency accused five student debt relief companies of charging customers unnecessary fees, resulting in a total payment of about $19 million.
The Education Department has warned borrowers to watch out for scams and fraudulent behavior related to federal student loans. They emphasized that any services related to federal student loan repayment or relief should not cost the borrower any money.
