The Court of Appeals for the Ninth Circuit has upheld a ruling in favor of the Consumer Financial Protection Bureau against a company and its owner that were sued for allegedly mailing deceptive solicitations to individuals that advertised help in applying for scholarships, determining that the owner meet one of the definitions for a “covered person” and that the solicitations failed the net impression test.
A copy of the ruling in the case of CFPB v. Armond Aria and Global Financial Support can be accessed by clicking here.
The CFPB initiated an enforcement action against the defendants back in 2015. The case was stayed pending the outcome of a collateral federal criminal investigation into Aria. After the stay was lifted and the defendant was unable to secure counsel to appear and defend itself against the action, a District Court judge granted a motion for default judgment. The judge ordered the defendants to may $4.7 million in restitution and imposed a civil money penalty of $10 million.
The defendants appeals, arguing that the nonfinancial advice that was provided in regards to free scholarships is outside the scope of the CFPB’s authority, and that the solicitations were not deceptive.
The Consumer Financial Protection Act lists 10 different categories of covered persons, one of which is “providing financial advisory services … to consumers on individual financial matters or relating to proprietary financial products or services … .” Because the solicitations dealt with the topic of financial aid and scholarships for attending college, the advice was “no less ‘financial’ than advising students to leverage their unique access to federally subsidized loans,” the Appeals Court wrote. “Aria’s advice covered the entire gamut of financial aid and was undoubtedly financial in nature.”
Individuals who paid the processing fee were not provided with the “targeted financial aid opportunities” they were promised in the solicitation, instead receiving “group level” information, which the Appeals Court held was deceptive. Also deceptive was mentioning a filing deadline even though there no rule for treating late filers differently.