The Federal Trade Commission (FTC) is prohibiting Automatic Funds Transfer Services, Inc. (AFTS) and its owner, Eric Johnson from processing debt relief payments.

The Commission's action comes after obtaining a court order for a permanent injunction and monetary judgment, and other relief to settle its complaint against AFTS and Johnson.

In its complaint, the FTC alleged that AFTS and Johnson processed at least $31 million for a fraudulent student loan debt relief scheme operator sued by the Commission in 2019.

The debt relief scheme operator was doing business under different names including The Student Loan Group (SLG).

According to the FTC, the defendants processed payments from thousands of consumers deceived by SLG into paying illegal upfront fees with false promises to reduce their monthly loan payments. The Commission included in its complaint a correspondence showing that AFTS and Johnson knew about SLG's fraudulent debt relief scheme.

In addition, the FTC alleged that AFTS and Johnson received complaints from banks and consumers. The defendants were aware that SLG was collecting illegal upfront fees from consumers. They knew that SLG had high return rates and it kept changing its company and brand names to prevent negative publicity among other reasons.

Despite the warning signs, the defendants continued processing consumer payments for the student loan debt relief scheme operator until it was shut down by the FTC.

AFTS and Johnson settled with the Commission. Under the settlement, the defendants agreed to the order permanently prohibiting them from processing payments for debt relief or student loan companies.  The defendants also agreed to the order banning them from processing payments indirectly for any merchant that does not have a signed contract with AFTS.

In addition, AFTS and Johnson agreed to implement enhanced screening and monitoring of certain high-risk clients to ensure such clients are not operating illegally.

Furthermore, the order imposed a monetary judgment of $27,584,969, which is largely suspended due to the defendants' inability to pay. The full amount will be due immediately if found to have misrepresented their financial status.  The order required AFTS and Johnson to surrender $500,000 to the FTC for consumer redress.

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

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