Student Loan Debt Relief Operators Banned by FTC
FTC Debt Relief Defendants
In October 2017, a federal district court issued a temporary restraining order against the SDD defendants, halting their alleged deceptive student loan debt relief practices and freezing their assets. The court later entered a preliminary injunction. The SDD settlement prohibits the defendants from making misrepresentations related to financial products or services, requires the defendants to pay approximately $2.2M and includes a partially suspended $13 million judgment.
In September 2017, a federal district court issued a temporary restraining order halting the ASLC defendants’ allegedly deceptive student loan debt relief practices. The court later entered a preliminary injunction. As set forth in the FTC’s complaint, the ASLC operators pretended to be affiliated with the U.S. Department of Education or with consumers’ loan servicers, and misled consumers into believing that illegal upfront fees were being used to pay off their student loans. The FTC alleged that the defendants collected at least $23 million from student loan borrowers by falsely promising loan forgiveness, lowered monthly payments, and reduced interest rates. The FTC also has obtained a settlement with the ASLC defendants, which includes a partially suspended judgment of $23 million and payment of approximately $1.3 million.
Debt Relief Service and Credit Repair Scams
According to the FTC, debt relief service scams target consumers with significant credit card debt by falsely promising to negotiate with their creditors to settle or otherwise reduce consumers’ repayment obligations. What grabs the FTC’s attention is that such operations often charge large up-front fees. The FTC’s interest is piqued when automated “robocalls” to consumers on the Do-Not-Call List are used. The FTC has brought, and shall most likely continue to bring, law enforcement actions against unlawful credit-related services. The agency has also partnered with the states to bring hundreds of additional lawsuits.
In 2010, the FTC amended its Telemarketing Sales Rule to protect consumers seeking debt relief services. The TSR prohibits for-profit companies that sell these services over the telephone from charging a fee before they actually settle or reduce a consumer’s debt. It also prohibits debt relief providers from making misrepresentations and requires that they disclose key information that consumers need in evaluating these services.
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