This Week At The Ninth: Deceptive Financial Advisory Services And Religious Speech

Published date21 December 2022
Subject MatterFinance and Banking, Consumer Protection, Litigation, Mediation & Arbitration, Financial Services, Consumer Law, Trials & Appeals & Compensation
Law FirmMorrison & Foerster LLP
AuthorAlexandra Avvocato

This week, the Court addresses the definition of 'financial advisory services' under the Consumer Financial Protection Act and whether a plaintiff's allegations of First Amendment violations plausibly stated a claim under Federal Rule of Civil Procedure 12(b)(6).

CONSUMER FINANCIAL PROTECTION BUREAU V. ARIA

The Court holds that a defendant's business, which advertised itself as a targeted program for helping students apply to scholarships, constituted 'financial advisory services' covered by the Consumer Financial Protection Act (CFPA) and was deceptive in violation of the Act.

The panel: Judges Graber, Tallman, and Friedland, with Judge Tallman writing the opinion.

Key highlight: 'Aria is incorrect that scholarships are not financial in nature merely because they do not have to be repaid. As discussed, the ordinary meaning of financial is broad and encompasses both cash financing and debt financing. Indeed, the definition of 'finance' specifically contemplates raising funds, regardless of their origin, for college tuition. Advising students to exhaust scholarship opportunities before taking on debt is no less 'financial' than advising students to leverage their unique access to federally subsidized loans.' (Citations omitted).

Background: Defendant Armond Aria, through his company Global Financial Support, Inc. (Global), advertised his business by mailing solicitations to prospective college students. The solicitations advised students to apply for 'free' scholarships before taking out student loans. The solicitations then offered to provide each student with targeted scholarship opportunities in exchange for a processing fee. Students who paid the fee received a booklet containing information about scholarships and financial aid programs. Although the booklets contained some tailored information, Aria admitted that most of the information was generated at a group level and was not tailored to each individual student. Through these practices, Global generated $4.7 million in fees from 76,000 students.

The Consumer Financial Protection Bureau (CFPB) filed a civil enforcement action against Aria and Global. The CFPA prohibits 'any covered person' from 'engag[ing] in any unfair, deceptive, or abusive act or practice.' 15 U.S.C. '5536(a). The CFPB alleged that the defendants' conduct was deceptive because, among other things, the solicitations misleadingly led students to believe that Global would match them with individually targeted scholarships and help...

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