The Federal Trade Commission obtained an order permanently banning a payment processor that facilitated a fraudulent student loan debt relief scheme from processing debt relief payments.  The order also requires the company and its owner to surrender $500,000 to the FTC for consumer redress.

The FTC’s complaint against Automatic Funds Transfer Services, Inc. (AFTS) and its owner, Eric Johnson, alleges that AFTS processed at least $31 million in consumer payments for a fraudulent student loan debt relief scheme sued by the FTC in 2019. The debt relief scheme used numerous names, including The Student Loan Group (SLG).

“Firms that facilitate fraud—especially against struggling student borrowers—need to pay a price,” said Samuel Levine, Director of the FTC’s Consumer Protection Bureau. “Many of these firms may operate in the background, but they’re very much in our sights.”

AFTS and Johnson processed payments from tens of thousands of consumers deceived by SLG into paying illegal upfront fees with false promises to lower the consumers’ monthly student loan payments. The complaint cites correspondence showing that AFTS and Johnson were aware of numerous issues with the scheme.

The FTC alleges that the company and Johnson received complaints from, among others, consumers and banks; were aware that SLG had high return rates and was collecting illegal upfront fees from consumers; and knew that SLG kept changing company and brand names to, among other reasons, mitigate negative publicity. Despite numerous warning signs, AFTS and Johnson continued processing consumer payments for SLG right until the scheme was ultimately shut down following an enforcement action by the FTC.

The settlement permanently prohibits AFTS and Johnson from processing payments for debt relief or student loan companies. They will also be prohibited from processing payments indirectly for any merchant that does not have a signed contract with AFTS, and will be required to apply enhanced screening and monitoring of certain high risk clients to ensure such clients are not operating illegally.

The settlement includes a monetary judgment of $27,584,969, which is largely suspended due to an inability to pay. AFTS and Johnson will be required to surrender $500,000 to the FTC, and if they are found to have misrepresented their financial status, the full amount of the judgment would be immediately due.