The Number of People You Give Gifts or Rides Too Impacts Your Student Loan Payment

Under the heading of “You Can’t Make This Stuff Up” I was reading a recent FTC filing in the case involving American Financial Benefits Center.

An FTC investigator made a call to an AFBC sales agent named Hollywood. The sales representative asks the undercover investigator about how big her family is.

HOLLYWOOD: Three, so is that you, your husband, and —

MS. STAHL: Yes, and —

HOLLYWOOD: — a child, or —

MS. STAHL: My daughter, yes.

HOLLYWOOD: Okay. And is there anyone else you, like, buy presents for or anything like that throughout the year?

MS. STAHL: I can’t quite hear you —

HOLLYWOOD: (Inaudible).

MS. STAHL: — I couldn’t hear you. I’m sorry. Could you speak up a little?

HOLLYWOOD: Like — like anyone that you buy presents for that doesn’t live in your house, like parents or aunts or uncles or anything like that?

MS. STAHL: You mean buy, like, birthday presents and Christmas presents?

HOLLYWOOD: Yeah, birthday, Christmas, anything like that, because that’s all a part of your family size, as well.

MS. STAHL: Well, yes, I — I do buy presents for my parents and my brother. – Source

In another court document, the issue of family size “flexibility” is also brought up. A recorded call with a sales representative included:

“Now, support includes any kind of money – gifts, loans, housing, food, clothing, car, medical or dental, payment of college costs. Do you help anybody – if you have somebody on your cell phone plan; if you have somebody on your gym membership, they’re considered part of your family. And we just had Christmas. You know, if you bought presents, clothes, watch, earrings, toilet paper, they’re a part of your family.” – Source

Another consumer states they were told the following when it comes to family size determination by the AFBC sales representative, ”

Call me crazy but it certainly seems like the family size inflation approach could blow up for the company and consumers. In the complaint filed by the FTC they mention this issue. They say, “Defendants make false or unsubstantiated representations to consumers about their eligibility for IDR programs based on inaccurate family size and income information. For example, Defendants inform consumers that they are allowed to inflate their family size on the IDR application.”

And also, “Family size” for the IDR programs “means the number that is determined by counting the borrower, the borrower’s spouse, and the borrower’s children, including unborn children who will be born during the year the borrower certifies family size, if the children receive more than half their support from the borrower. A borrower’s family size includes other individuals if, at the time the borrower certifies family size, the other individuals – (i) Live with the borrower; and (ii) Receive more than half their support from the borrower and will continue to receive this support from the borrower for the year the borrower certifies family size.” 34 C.F.R. § 682.215(a)(3).

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The family size listed on an IDR program application affects eligibility for these programs and the monthly amount a consumer will have to pay. Because of Defendants’ misrepresentations about family-size requirements, consumers may be improperly enrolled in federal student loan programs for which they do not qualify.”Mr. Wisnieswki asked me about my household income and dependents. I told him I had no dependents, as my children were adults. He then asked whether I had friends or family that spent time at my home. I told him that I often took care of my grandchildren on the weekends. He told me that if my children or grandchildren spent any amount of time at my home, they qualified as dependents for the purpose of the loan modification. Based on the information I told him, Mr. Wisnieswki told me I had eleven dependents. I was not sure whether this was an accurate figure. But, Mr. Wisnieswki reassured me I could list my children and my grandchildren. He informed me that this was a new program and that he was an expert. I trusted him.”

Another document filed by the FTC is a statement from a sales representative who says, “Mr. Henry and Tyler Colt gave me a sales script to follow and trained me on how to sell the company’s services. They also coached me on how to convince clients to inflate their family size on their student loan payment reduction applications. Mr. Henry and Mr. Colt instructed me to tell clients that nearly anyone could count as a family member on a student loan payment reduction application, including people they gave Christmas presents to. AFBC’s owners and managers knew the company was submitting student loan payment reduction applications to lenders that contained false information.” – Source

Another sales agent says, “When people called, I would qualify them for our program based off income, occupation, and family size. Since occupation and income are hard to falsify due to the IRS, we were told to focus on exaggerating the family size to help people qualify for our program.

I recall Cameron, a manager, telling us off script that we had to embellish family size and that anyone the potential client gave gifts to could be considered a family member. The idea behind this was that if you told the government you had many dependents, there was a higher likelihood that your student loan payments would be reduced. The highest family size I saw get approved was certainly in the double digits, somewhere between 12-15 family members.” – Source

The statement from this employee might be the most damning when it comes to playing with the family size, “We had access to every bit of the client’s personal information and would log in to their Federal loan accounts often to set their loans on Forbearance until we could get them approved for the IBR plan using falsified family size information. Sometimes the process would take months for various reasons. We were told to tell the client that they could include people in their family size that did not live with them, that was not related to them, and that they did not account for more than 50% of their income. Some of the people we were told they could allow was: someone they take to the movies, someone they give rides to, someone they take out to lunch, any gifts, money, donations or small assistance they provide to individuals. We were told to explain to the client that the definition of Family Size is very broad, and that it usually differs from the number of exemptions on their Tax Return. At first, lots of IBRs were getting approved with obscene family size numbers. Once the loan servicers were getting thousands of these requests, they started to do many things to deter people from the program, because they really did not qualify for the program.” – Source

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Can you imagine the mess that would be created for consumers and any company following this same liberal interpretation on family size determination like AFBC? As the FTC observed, “This can significantly set back the consumer’s repayment of the student loans and potentially expose a consumer to additional liability.” – Source

As a final observation, it looks like the FTC determined Brandon Frere received compensation of $359,700 from 2014 to 2017 while a Thomas Knickerbocker received $439,084. – Source

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