Student Loan Assistance Programs

CFPB Files Legal Action Against Doc Prep Student Loan Assistance Companies

Written by Steve Rhode

The Consumer Financial Protection Bureau (CFPB) has just filed suit against a number o players in the student loan assistance companies and individuals. The case was filed on January 9, 2020 against Chou Team Realty, Monster Loans, MonsterLoans; Lend Tech Loans, Docu Prep Center, Certified Document Center, Document Preparation Services, DocuPrep Center, Certified Doc Prep, Certified Doc Prep Services, Assure Direct Services, Direct Document Solutions, Secure Preparation Services, Secure Preparation Services, Docs Done Right, Bilal Abdelfattah, Belal Abdelfattah, Bill Abdel, Robert Hoose, Ed Martinez, Jawad Nesheiwat, Frank Anthony Sebreros, and David Sklar. Additional parties included Tom Chou, Sean Cowell, Lenneth Lawson, Cre8labs, XO Media, and TDK Enterprises.

The CFPB said, “the Consumer Financial Protection Bureau (Bureau) filed suit against several companies and individuals involved in offering student loan debt-relief services for allegedly obtaining consumer reports illegally, charging unlawful advance fees, and engaging in deceptive conduct. The Bureau’s action is against a mortgage lender called Chou Team Realty, LLC, which does business as Monster Loans (Monster Loans); an allegedly sham mortgage brokerage called Lend Tech Loans, Inc.; and several student loan debt-relief companies, including Docu Prep Center, Inc., which does business as DocuPrep Center and Certified Document Center; Certified Doc Prep Services, LP; Assure Direct Services, Inc.; Direct Document Solutions, Inc.; Secure Preparation Services, Inc.; and Docs Done Right, Inc. The Bureau is also taking action against several individuals, including Bilal Abdelfattah, who is also known as Belal Abdelfattah and Bill Abdel; Thomas “Tom” Chou; Sean Cowell; Robert Hoose; Eduardo “Ed” Martinez; Jawad Nesheiwat; Frank Anthony Sebreros; and David Sklar.

As described in the complaint, the Bureau alleges that between 2015 and 2017, Monster Loans violated the Fair Credit Reporting Act (FCRA) by obtaining consumer-report information for millions of consumers with student loan debt from a major credit bureau on the pretense that the company planned to use the information to offer mortgage loans to consumers when, in fact, Monster Loans provided the reports to the student loan debt-relief companies to use in marketing their services. The Bureau also alleges that, between 2017 and at least early 2019, Lend Tech Loans similarly violated the FCRA by obtaining consumer report information for millions of consumers for use in marketing student loan debt-relief services.

The Bureau further alleges that, while offering and providing student loan debt-relief services, certain defendants violated the Consumer Financial Protection Act of 2010 (CFPA) and the Telemarketing Sales Rule (TSR) by making deceptive representations about the companies’ services. Specifically, the Bureau alleges that certain defendants misrepresented to consumers that they would have their interest rates reduced, have their credit scores improved, and that the U.S. Department of Education would become their servicer. The Bureau also alleges that certain defendants unlawfully charged and collected at least $15 million in fees before consumers received any adjustment to their student loans and made any payments toward their adjusted loans.

The Bureau filed its complaint in the U.S. District Court for the Central District of California on Jan. 9, 2020. The Bureau’s complaint seeks an injunction against the defendants, as well as damages, redress to consumers, disgorgement of ill-gotten gains, and the imposition of civil money penalties. The complaint also names several defendants in order to obtain relief and seeks disgorgement of those relief defendants’ ill-gotten gains.”

The Suit States

Monster Loans’ Purchases of Prescreened Lists

52. Monster Loans and Lend Tech have purchased from Experian prescreened consumer reports (also known as “prescreened lists”) that contained information regarding consumers with student loans, including consumers’ names, addresses, number of student loans, and aggregate student loan balances.
53. In 2015, Monster Loans applied for and received an account with Experian, which enabled it to purchase prescreened lists.
54. In its application, Monster Loans certified to Experian that it would use prescreened lists to make firm offers of credit for mortgage loans.
55. During and after the enrollment process, Monster Loans also represented to Experian that it would use prescreened lists to market its mortgage products.
56. Monster Loans did not disclose to Experian that prescreened lists would be provided to other companies and used to market debt-relief services.
57. Between at least December 2015 and May 2017, Monster Loans primarily used its account with Experian to obtain prescreened lists for use by other companies that marketed student-loan debt-relief services, including the Student Loan Debt Relief Companies.
58. In total, Monster Loans purchased prescreened lists containing information about more than 7 million consumers with student loans.
59. The prescreened lists that Monster Loans purchased were used to market debt-relief services, and not to make firm offers of credit or insurance.
60. Nesheiwat oversaw Monster Loans’ purchases of prescreened lists from Experian for use by the Student Loan Debt Relief Companies in their direct mailings.
61. Several other officers and employees of Monster Loans, including Chou, Cowell, and Abdel, were aware of and participated in the company’s efforts to purchase prescreened lists for the Student Loan Debt Relief Companies through the company’s account with Experian.
62. Sklar and Hoose obtained prescreened lists through Monster Loans’ account with Experian and used the lists to market Docu Prep Center’s student-loan debt-relief services.
63. In or around May 2017, Monster Loans stopped purchasing prescreened lists for the Student Loan Debt Relief Companies through its account with Experian.

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Lend Tech’s Purchases of Prescreened Lists

64. In June 2017, Cowell registered Lend Tech as a purported mortgage-brokerage company.
65. In fact, Lend Tech is a sham entity that has only ever been used to obtain prescreened lists from Experian.
66. Lend Tech’s application to Experian certified that it would use prescreened lists to make firm offers of credit for mortgage loans.
67. Lend Tech did not disclose to Experian that the prescreened lists would be provided to other companies and used for the purpose of marketing debt-relief services.
68. Monster Loans helped Lend Tech satisfy Experian’s due-diligence review for new applicants so that Lend Tech could obtain an Experian account. For example, Monster Loans purported to provide Lend Tech office space under a sublease agreement, and also provided an approval letter agreeing to fund the loans that Lend Tech was purportedly going to broker.
69. During August and September 2017, Lend Tech used its account with Experian to order prescreened lists containing information regarding more than 1.5 million consumers with student loans for the Student Loan Debt Relief Companies.
70. Cowell, Abdel, Sebreros, and Chou were aware of and participated in Lend Tech’s efforts to purchase prescreened lists for the Student Loan Debt Relief Companies during August and September 2017.
71. In November 2017, Cowell transferred ownership of Lend Tech to a friend of Martinez named Sergio Loza.
72. At the time of the transfer, Lend Tech had no meaningful assets other than the account with Experian.
73. Between November 2017 and at least January 2019, Abdel, Sebreros, and Martinez controlled Lend Tech’s Experian account.
74. During that period, Lend Tech obtained prescreened lists containing information regarding more than 11 million consumers.
75. Lend Tech continued representing to Experian that it would use the prescreened lists for its own marketing of mortgage loans.
76. In fact, Lend Tech has never used the prescreened lists to market mortgage loans.
77. Martinez, Sebreros, and Abdel resold the prescreened lists to numerous other companies, including companies offering student-loan debt-relief services.
78. Martinez, Sebreros, and Abdel also used the prescreened lists to market student-loan debt-relief services through new companies created during or after September 2017.
79. The student-loan debt-relief companies that received prescreened lists purchased by Lend Tech between November 2017 and January 2019 did not use the lists to make firm offers of credit or insurance.

Student Loan Consolidations, Repayment Programs, and Forgiveness Programs

80. ED offers several federal student-loan repayment and forgiveness programs. Some programs potentially offer lower monthly loan payments.
Some allow consumers to obtain loan forgiveness.
81. These programs are administered through third-party student-loan servicers that handle the billing and other services on federal student loans.
82. To access certain repayment and forgiveness programs, consumers must first consolidate (i.e., combine) multiple federal student loans into one loan. Consolidating results in, among other things, a single monthly payment instead of multiple monthly payments.
83. Following consolidation or enrollment in a new repayment or forgiveness program, the consumer’s loan continues to be serviced by a third-party student-loan servicer.

The Student Loan Debt Relief Companies and Docs Done Right

84. The Student Loan Debt Relief Companies each offered, in exchange for a fee, to assist consumers with consolidating their federal student loans and with choosing between and enrolling in repayment and forgiveness programs offered by ED. The Student Loan Debt Relief Companies did not themselves offer or extend credit.
85. The Student Loan Debt Relief Companies primarily marketed their debt-relief services through direct mail.
86. When consumers called in response to the direct-mail solicitations, sales representatives purported to advise consumers about their eligibility for and the potential benefits of consolidating their federal student loans and enrolling in ED’s repayment and forgiveness programs.
87. After Docs Done Right was created in late 2015, its employees participated in a portion of the telemarketing sales call regarding consumers’ understanding of the services.
88. Following enrollment, Docs Done Right handled communications with consumers concerning the debt-relief services, the payment of fees, and consumer complaints. Docs Done Right posed as the relevant Student Loan Debt Relief Company in those communications. Docs Done Right also handled the preparation and submission of consumers’ applications to consolidate their federal student loans and enroll in ED’s repayment and forgiveness programs.

Misrepresentations about Lower Interest Rates

89. In direct-mail solicitations and in sales calls, the Student Loan Debt Relief Companies represented that consumers could obtain a lower interest rate by consolidating their loans.
90. When a federal student loan is consolidated, the consolidated loan has a fixed interest rate for the life of the loan. The fixed rate is the weighted average of the interest rates on the consolidated loans, rounded up to the nearest one-eighth of one percent.
91. Asa result, after consolidation, the consumer’s new loan has either the same effective interest rate as the prior loans or a higher rate.
92. The Student Loan Debt Relief Companies’ representations that consolidation would lead to a lower interest rate were therefore false.
93. Consumers with federal student loans are generally eligible for an interest rate reduction if they set up automatic monthly payments.
94. At times between 2015 and 2017, the Student Loan Debt Relief Companies implied that consumers were required to consolidate their loans to be eligible for the interest-rate reduction associated with setting up automatic monthly payments.
95. But consumers can receive the interest-rate reduction associated with setting up automatic monthly payments regardless of whether they consolidate their loans.

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Misrepresentations about Improved Credit Scores

96. Between 2015 and 2017, the Student Loan Debt Relief Companies represented during sales calls that consolidating federal student loans would improve consumers’ credit scores.
97. In many instances, consolidating is not likely to improve a consumer’s credit score, such as when the consumer is current on their student loan payments.
98. By presenting themselves as experts on student loans and making representations about credit score changes, the Student Loan Debt Relief Companies implied that the Companies had a reasonable basis to represent that consolidation would increase consumers’ credit scores.
99. Prior to making such representations, the Student Loan Debt Relief Companies had no reason to believe that consumers’ credit scores would improve following consolidation, and the Companies did not attempt to measure thereafter whether consumers’ credit scores did in fact improve following consolidation.

Misrepresentations that ED Would Become Consumers’ “New Servicer”

100. At times between 2015 and 2017, Docu Prep Center represented to consumers that, after they consolidated their loans, ED would become their “new servicer.”
101. Docu Prep Center also represented that student loan servicers did not act in consumers’ best interests and implied that consumers would not have to interact with third-party student loan servicers after consolidating their loans.
102. In fact, ED does not become the “new servicer” on loans that are consolidated. ED contracts with third-party student-loan servicers that handle federal student loans both before and after the loans are consolidated. Loan consolidation does not enable consumers to avoid interacting with third-party servicers.

Collection of Advance Fees

103. The Student Loan Debt Relief Companies charged consumers a fee that ranged between $699 and $999.
104. The Student Loan Debt Relief Companies charged and received fees before consumers’ applications for loan consolidations, loan repayment plans, and loan forgiveness plans were approved, and before consumers had made the first payments under the altered terms of their student loans.
105. Docs Done Right participated in the charging of fees and received its portion of the fees before consumers’ applications for loan consolidations, loan repayment plans, and loan forgiveness plans were approved, and before consumers had made the first payments under the altered terms of their student loans.
106. Collectively, the Student Loan Debt Relief Companies and Docs Done Right collected more than $15 million in illegal advance fees from thousands of consumers nationwide between 2015 and at least 2017.

Role of Individual Defendants in Deceptive Representations and Charging of Advance Fees

107. Nesheiwat, Sklar, and Hoose each participated directly in Docu Prep Center’s making of the representations described in this Complaint or had the authority to control them, and each had knowledge of the representations, was recklessly indifferent to the truth or falsity of the misrepresentations, or was aware of a high probability of fraud along with an intentional avoidance of the truth.
108. Nesheiwat, Sklar, and Hoose each participated directly in the charging of fees by Docu Prep Center or had the authority to control its charging of fees, and each had knowledge of Docu Prep Center’s fee-charging practices or was recklessly indifferent to those practices.
109. Sebreros participated directly in Assure Direct Services’ making of the representations described in this Complaint or had the authority to control them, and had knowledge of the representations, was recklessly indifferent to the truth or falsity of the misrepresentations, or was aware of a high probability of fraud along with an intentional avoidance of the truth.
110. Sebreros participated directly in the charging of fees by Assure Direct Services or had the authority to control its charging of fees, and had knowledge of Assure Direct Services’ fee-charging practices or was recklessly indifferent to those practices.
111. Martinez participated directly in the charging of fees by the Student Loan Debt Relief Companies and Docs Done Right or had the authority to control the charging of fees, and had knowledge of the Student Loan Debt Relief Companies’ and Docs Done Right’s fee-charging practices or was recklessly indifferent to those practices.

Alleged Violations

The CFPB states the operation of the defendants violated the Fair Credit Reporting Act, charged fees in violation of the Telemarketing Sales Rule, made interest rate misrepresentations, and a number of other items.

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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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