Recently I had received a tip that at least one of the companies named in a recent Federal Trade Commission (FTC) sealed lawsuit had been raided.
Subsequently, the case below was unsealed.
It appears the FTC filed suit, under seal on November 4, 2019, against American Financial Support Services, Arete Financial Group, Arete Financial Freedom, CBC Conglomerate, 1file.org, Diamond Choice, Interest Rate Solutions, J&L Enterprise, Premier Solutions Servicing, La Casa Bonita Investments, Casa Bonita Investments, Education Loan Network, Edunet, US Financial Freedom Center, Carey Howe, Anna Howe, Shunmin Hsu, Mike Hsu, Ruddy Palacios, Ruddy Barahona, Oliver Pomazi, Jay Singh, and MJ Wealth Solutions.
The FTC position is, “Since at least Apri12014, Defendants have operated an unlawful debt relief scheme that preys on consumers with student loan debt. Defendants promise consumers that, in exchange for the payment of an upfront fee and subsequent monthly fees, Defendants will reduce consumers’ monthly student loan payments or eliminate all, or a substantial portion of, their federal student loan debt by enrolling consumers in student loan forgiveness, consolidation, or repayment programs. In numerous instances, however, Defendants fail to reduce or eliminate consumers’ loan balances or monthly loan payments. Defendants also break their promises that they will apply consumers’ monthly fee payments to Defendants toward the consumers’ loans and assume responsibility for servicing those loans, leaving consumers on the hook for adverse consequences like increased interest and delinquency. As a result, consumers who already struggle to pay their student loans lose even more money to Defendants. Since the beginning of their scheme, Defendants have pocketed at least $43 million in revenues from consumers.”
The FTC position in the complaint appears to apply to nearly every student loan assistance company out there. The FTC describes the services by saying:
“Defendants promise to enroll consumers in student loan forgiveness, consolidation, and repayment programs to reduce or eliminate their monthly payments and principal balances. Defendants make these claims in radio and television advertisements, on the Internet, and in telemarketing calls. In some instances, in response to the Defendants’ marketing materials, consumers call Defendants for more information. In other instances, Defendants’ telemarketers, or third-party telemarketers working on Defendants’ behalf, make unsolicited outbound calls to consumers to offer Defendants’ services and convince consumers to sign up with Defendants.
In both inbound and outbound telemarketing calls, and in public facing statements, Defendants make at least four types of deceptive claims: (1) consumers who purchase Defendants’ services will have their monthly student loan payments reduced to a lower, specific amount or have their loan balances forgiven in whole or in part; (2) most or all of consumers’ monthly fee payments to Defendants will be applied toward consumers’ student loans; (3) Defendants will assume responsibility for servicing consumers’ student loans; and (4) Defendants are affiliated or work directly with ED or one of ED’s authorized loan servicers.”
If I was running one of the mass market student loan assistance companies the recent run of FTC cases against such companies would get my attention. It sure seems the FTC is working hard to close this niche down.
Another common complaint I hear about such companies is stated in the complaint. It says, “Furthermore, on IDR applications, Defendants frequently misstate borrowers’ family sizes or indicate that borrowers do not have access to their spouses’ income, even though they share bank accounts and file taxes jointly. Defendants do so in an effort to obtain for borrowers a larger reduction in payments than the borrowers would otherwise qualify for under ED regulations.”
The FTC position is the actions of these student loan assistance companies is a violation of the Telemarketing Sales Rule, misrepresents and affiliation with the Department of Education, and makes material debt relief misrepresentations.
We will have to wait to see how this all unfolds in court.