Payment Servicing Student Loans – Compliance | Student Loans Payment Consolidation & CRM

Student Loan Consolidation is considered a performance based industry, meaning that to be compliant, fees cannot be charged to a customer until services are rendered. Yet it is clear that operating in this manner opens a student loan company up to heavy losses due to committing services prior to payment. We however at Payment Automation Network have derived a solution:

Payment Automation Network will assist with your compliance by drafting and holding your customers funds in our escrow/trust account, securing your revenue until your consolidation services are rendered. After the consolidation services are complete, Payment Automation Network will release your service fees to you thus keeping you in compliance with the FTC, CFPB and Department of Education.

Debt Settlement Rules from the FTC

Customers are not required to pay an advance fee. According to the FTC, payment may only be collected after:

  • at least one of the customer’s debt obligations has been renegotiated, settled, reduced or issued new terms
  • a written settlement agreement, debt-management plan or other agreement has been made between the customer and the creditor
  • the customer has made at least one payment to the creditor following the agreement that the service provider negotiated

Once these are achieved, the debt relief provider’s fee for a single debt “must be in proportion to the total fee that would be charged if all the debts had been settled,” says the FTC. Alternatively, if the fee is based on the percentage of what the consumer saves, “the percentage charged must be the same for each of the consumer’s debts.”

Customers are required to put fees and savings in a dedicated account. In the past, fees and payments went into an “escrow account” or “savings account,” but neither were established at a true bank account. Under the new rules, the FTC stipulates that providers may only require a dedicated account as long as:

  • the account is established at an insured financial institution
  • the customer owns the funds, including any interest accrued
  • the consumer can withdraw the funds at any time without penalty
  • the provider does have any affiliation with the financial institution
  • the provider does not exchange any referral fees with the financial institution

Customers must be made aware of various monetary and program details. According to the FTC, providers must make several disclosures when marketing their services to customers before they sign up for any debt-relief services. The providers must disclose:

  • how much it will cost and any refund policies
  • how much money customers will need to save up in order to settle
  • any effect on credit, potential of lawsuit or possible tax consequences
  • key information about dedicated accounts
  • whether the provider is a for-profit or nonprofit entity
  • how long it will take for consumers to see results
  • accurate estimates of how much money a consumer will save