Mission Hills Federal and Others Added to FTC Naughty List Over Student Loan Assistance

The Federal Trade Commission has amended its complaint in a student loan debt relief case, naming an additional defendant who allegedly took part in a scam that bilked more than $23 million from thousands of consumers with false claims that it would service and pay down their student loans.

According to the FTC, Labiba Velazquez was one of the operators of Mission Hills Federal and Federal Direct Group, a student loan debt relief scheme that lured consumers into paying hundreds, if not thousands, of dollars in illegal upfront fees with false promises to lower consumers’ monthly student loan payments. The defendants also allegedly tricked consumers into submitting their monthly student loan payments directly to the defendants by falsely claiming to take over servicing the consumers’ loans. In reality, the defendants either only applied minimal payments on consumers’ loans or, in many instances, applied none of the payments to the loans, pocketing the money for themselves.

The Complaint Says

“Since at least May 2014, Defendants have operated an unlawful debt relief enterprise that preys on consumers with student loan debt. Defendants’ scheme has involved promising consumers affordable loan repayment plans, severing consumers’ contact with their federal loan servicers, and pocketing the consumers’ monthly loan payments.

Defendants have lured consumers with telephone calls and emails promising to reduce consumers’ monthly student loan payments or loan balances by consolidating their loans or enrolling them in income-based repayment plans. Defendants have promised to service the repayment of consumers’ student loans and, in many instances, inform consumers they have already or will “manage” or “take over” the loans. Defendants tell consumers who sign up for Defendants’ services to cease making payments to their servicers and, instead, to make monthly loan payments to the Defendants.

Defendants have then engaged in a variety of tactics to arrange for consumers’ loans to go into forbearance, deferment, or zero dollar monthly payment status where lenders would not expect to receive monthly payments nor contact consumers when payments were not received. In numerous instances, Defendants have required consumers to provide their federal student aid personal identification numbers (“FSA PINs”), or other personal information, in order to enroll in Defendant’s debt relief program. Defendants have used consumers’ FSA PINs to change the contact information on file with consumers’ federal loan servicers – effectively preventing contact between consumers and their federal loan servicers.

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Consumers have discovered, sometimes after years of making monthly loan payments to Defendants, that Defendants failed to apply most or any of their payments to their student loans, but rather diverted consumers’ loan payments to themselves. In numerous instances, Defendants also failed to obtain the lower monthly payment amount or loan balance that they promised consumers.

In exchange for the promised debt relief services, Defendants have collected hundreds to thousands of dollars per consumer in illegal advance fees. Defendants have collected a total of more than $23 million from consumers since at least January 2016. Moreover, because Defendants have failed to apply most or any of consumers’ payments to their student loans, many consumers have accrued additional capitalized interest on the balance of their loans. As a result, many consumers have owed more on the balances of their student loans after signing up with Defendants.”

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