Over 7,100 student-loan borrowers will get $3.5 million in refunds after a debt-relief company was accused of illegally charging them up to $699 in fees to reduce their federal balances, a consumer watchdog says

• After the CFPB said they were scammed, 7,100 borrowers will receive $3.5 million worth of checks.
• The CFPB accused Timemark, a debt-relief company, of illegally charging federal borrowers fees.
• Scams are likely to grow following the Supreme Court decision to strike down student-debt relief.

A federal consumer watchdog just cracked down on yet another student-debt-relief company it accused of scamming thousands of borrowers.

On Thursday, the Consumer Financial Protection Bureau announced that over 7,100 student-loan borrowers would receive more than $3.5 million worth of checks in the mail after accusing Timemark Solutions — a student-debt-relief company — of violating the Telemarketing Sales Rule. The bureau said Timemark charged borrowers "illegal advance fees" to reduce their federal student-loan balances when the Education Department offered those services for free.

"From 2016 through October 2019, the company used telemarketing campaigns to convince people with federal student loans to pay up to $699 in fees to file paperwork to reduce or eliminate their monthly payments, through loan consolidation, forgiveness, or income-driven repayment plans," the press release said.

According to the Telemarketing Sales Rule, it's illegal for a telemarketer to request or receive fees for debt-relief services before the consumer has made at least one payment using the new arrangement. The CFPB said Timemark violated that rule because it requested fees from borrowers within a few days of them enrolling in the new plan.

The CFPB reached a settlement with Timemark in July 2020, and borrowers will soon start receiving refund checks in the mail administered by Epiq Systems, which has a contract with the agency to facilitate payments. Borrowers who do not receive a check but believe they are eligible can submit a claim to CFPB-Timemark.org, and borrowers with questions about the refunds can email info@cfpb-timemark.org or call 866-991-0913.

Over the past few years, the CFPB — along with the Federal Trade Commission — has scrutinized a variety of student-debt-relief companies over whether they engaged in fraudulent behavior. In December, for example, the CFPB accused five companies of illegally charging fees to borrowers for services that the Education Department offered for free, and in June, the FTC accused another company of promising borrowers loan forgiveness but instead "pocketed customers' payments."

These scams are likely to arise following the Supreme Court's decision at the end of June to strike down President Joe Biden's student-loan-forgiveness plan. Payments are scheduled to resume in October, and following the ruling, the FTC issued a warning to borrowers that they "might also be hearing from scammers who take advantage of confusion around big news like this."

The FTC said borrowers could avoid being scammed by never agreeing to pay for help with their student loans, not giving away their Federal Student Aid login information, and not trusting anyone who contacts them to promise debt relief, even if they say they work with the Education Department.