CFPB Sanctions RAM Payment & Account Management Systems

On Wednesday, May 11, the Consumer Financial Protection Bureau (CFPB), a federal watchdog agency responsible for consumer protection in the financial services industry, finalized an enforcement action against debt-relief payment processors RAM Payment and Account Management Systems (AMS) as well as AMS’s co-founders, Gregory Winters and Stephen Chaya. The respondents have been accused of illegally collecting debt-relief fees, misleading borrowers about when said fees would be paid to debt-relief companies, sending illegal advance fees to debt-relief companies, and failing to return funds to consumers who cancelled their student loan debt-relief agreements.

The CFPB has ordered RAM Payment, AMS, Winters, and Chaya to pay over $11 million in consumer redress and civil money penalties, in addition to banning AMS, Winters, and Chaya from the debt-relief payment processing and account maintenance industry.

Respondents Found in Violation of the Telemarketing Sales Rule and the Consumer Financial Protection Act

According to the CFPB, RAM Payment and AMS violated the Telemarketing Sales Rule and the Consumer Financial Protection Act by assisting student-loan and traditional debt-relief companies at the expense of consumers by:

• Unlawfully Collecting, Processing, and Disbursing Fees: The respondents reportedly collected fees from student loan borrowers, whereafter they provided those fees to debt-relief companies prior to either the consumers’ debts having been renegotiated or a payment being made following a new debt settlement. Additionally, the respondents also disbursed illegal debt-relief fees, which were supposedly for “legal plan memberships” that would provide consumers with lawyers, were included in the cost of debt-relief services, or were required to settle borrowers’ debts.
• Deceiving Consumers About the Fees They Paid: The respondents also mislead student loan borrowers by expressing RAM Payment and AMS would not disburse fees until debt-relief companies had earned them. Despite this, they failed to notify consumers when fees had been earned prior to paying them.
• Paying Companies for Referrals: Lastly, the respondents reportedly paid illegal commissions to third-party marketing companies connected with both student debt-relief and traditional debt-relief companies, providing them with a stream of customer referrals.

Winters and Chaya also maintained illegal relationships with an affiliated financing company and several debt-relief companies. The pair were owners of Account Connect Limited (ACL), which advanced approximately 65% of the fees that certain debt-relief companies expected to receive from borrowers. ACL would recoup these advances from the payments consumers made into RAM Payment and AMS accounts. This was a conflict of interest, which the respondents failed to disclose by falsely stating that RAM Payment and AMS provided independent third-party services. Additionally, the pair illegally kept money held in borrowers’ accounts even after they cancelled or unenrolled from ACL-funded student loan debt-relief services.

In response, the respondents have been ordered to refund $8.7 million to consumers enrolled in their student loan debt-relief services and pay a $3 million fine to the CFPB. AMS, Winters, and Chaya have also been banned from the debt-relief payment processing and account maintenance industry. Meanwhile, RAM Payment must cease providing services to student loan debt-relief companies as well as debt-relief companies receiving funding from or owned by an affiliated company and paying commissions to third-party marketing companies for consumer referrals, in addition to consenting to the CFPB’s supervisory authority going forward.

The Situation of Student Debt Relief

Currently, there is a pause on student loan repayment, interest, and collections, which the United States Department of Education most recently extended to Aug. 31, 2022. Additionally, the Department of Education and the Biden-Harris Administration have committed to providing student loan relief to a significant number of borrowers. In addition to revamping the Public Service Loan Forgiveness (PSLF) Program, over $17 billion in targeted loan relief has already been provided to more than 700,000 borrowers over the last year.

Despite these efforts, student loan debt remains a major burden for many borrowers. According to Federal Student Aid (FSA), there were 43.4 million unduplicated student aid recipients by Sept 30, 2021. As of 2022 Q1, the total U.S. student loan balance stands at $1.59 trillion and is currently the largest form of non-housing debt. The pressure of having to pay off a significant debt burden has had a profound financial and psychological impact, and there have been calls for President Biden to completely cancel student loan debt for all borrowers.

Correction—May 13, 2022: This article was corrected from a previous version that incorrectly implied RAM Payment was banned from the debt-relief payment processing and account maintenance industry, in addition to misstating that it was required to cease providing services to all debt-relief companies.