Student Loan Assistance Programs

Why Does Equitable Acceptance Want to Hide Information From the Public

Can you believe this?
Written by Steve Rhode

Equitable Acceptance has been or was a big player in the student loan assistance space.

While it might not have been the intention of Equitable Acceptance to create an unfortunate situation of enabling less than stellar student loan relief companies to sell questionable services, sell the originated contracts to Equitable Acceptance, get paid a portion, and then go out of business.

In a class-action suit that began in 2018, Equitable Acceptance and the companies they worked with are fighting a battle.

The lawsuit states it is filed on behalf of 60,000 consumers that have become entangled with Equitable Acceptance Corporation and 41 companies that were dealers for Equitable Acceptance financing.

Equitable Acceptance asked the Court to seal documents filed to hide information.

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But it seems the Court feels the information, not yet public, should be unsealed and made available.

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The quoted information below is from the complaint filed that still has some of the alleged facts hidden.

“The Dealers lured vulnerable federal student loan borrowers with false promises of loan “forgiveness”—which the Dealers do not and cannot actually offer. At EAC’s direction, they sold this worthless “service” for $1,300. Because few borrowers could afford that exorbitant sum upfront, the Dealers told Borrowers that they could pay the full price in monthly payments of around $39 to $49, and steered the Borrowers to EAC to obtain this financing.

EAC then purported to extend each Borrower an entirely new loan, in the form of a maxed-out “line of credit” for the full price of the services. The total cost is amortized over many years, with a sky-high annual interest rate of almost 21%—with the effect that Borrowers end up owing EAC hundreds of dollars more than the already-inflated purchase price. EAC deliberately disguised the nature and true cost of the credit it was extending to secure Borrowers’ agreement to these usurious terms. EAC in turn pays the Dealers a portion of the full $1,300 price.

The Scheme depends on the coordinated efforts of EAC, Henn, and the Dealers, which must engage in concerted unlawful activity for the Scheme to succeed. EAC and Henn needed the Dealers to misrepresent the services they sell, or else no Borrower would agree to buy the services and thus would have needed EAC’s financing. To fund their operations, the Dealers needed EAC’s financing to get the payments on the otherwise unaffordable $1,300 price tag. The Dealers’ profit comes from these payments, as they were rewarded for each referral for a new EAC loan long before the Borrowers realize the Dealers’ promises of loan “forgiveness” were false.”

An ongoing issue is that while Equitable Acceptance is not originating any new loans under this scheme, it is still collecting on all the old ones.

Consumers are left holding the bag on loans for student loan assistance services to companies that have vanished.

The class-action suit filed also names additional Defendants: Jeffrey Henn, Teresa Henn, Integra Student Services, and SLF Center.

Alleged Equitable Acceptance Scheme

“For decades EAC has provided financing to consumers purchasing goods for household use such as vacuum cleaners, cookware, and air purifiers. In around 2015, EAC expanded its business to provide financing for purported “student loan assistance services” (the “Purported Services” or the “Services”).

EAC and the Dealers operated the Scheme by selling and financing the purchase of Purported Services from approximately 2015 until approximately 2018. Pursuant to consent judgments entered with multiple state and federal regulators, EAC is no longer permitted to issue new Credit Plans. Where not prohibited by consent judgments, EAC and certain Dealers continue to operate the Scheme by collecting from Borrowers on an ongoing basis up to the present.

EAC depended for referrals on individual Dealers, which pitched the Purported Services directly to Borrowers. EAC, at the direction of Henn, recruited the Dealers, and then signed a contract (the “Master Dealer Agreement”), which was drafted by EAC, with each one. EAC has stated that it has made these arrangements with forty-three such Dealers.”

“The Dealers found potential customers through direct mail solicitation, cold-calling, and social media and other online advertising for student loan forgiveness. The Dealers’ direct mail and online advertisements instructed Borrowers to contact the Dealers by phone. The Dealers also found Borrowers through referrals from EAC.

The Dealers purported to offer legitimate student loan assistance services to Borrowers. The Dealers fraudulently induced Borrowers to purchase the Purported Services by making a series of misrepresentations and material omissions to the Borrowers in phone calls, in later emails, and in their marketing materials. These misrepresentations included false promises of loan forgiveness; misrepresentations about the claimed value of the Purported Services; undisclosed harms such as potential increases in student loan balances and interest; false affiliation with the federal government; and misrepresentations about how the Borrowers will pay for the Purported Services.

The Dealers used aggressive sales tactics to pressure the Borrowers to agree to purchase the valueless Purported Services, including implying fake urgency and rushing the Borrowers through any review of the materials.

EAC then sent each Borrower misleading documents that purport to extend each Borrower a new sham loan (the “Deceptive Loan”), a line of credit with nearly 21% interest.”

“The Dealers misrepresented to Borrowers the nature of the payment obligation to EAC.

In consultation with EAC, each Dealer offered the Purported Services to Borrowers at the price of approximately $1,300.

Most Borrowers who purchased the Purported Services could not afford to pay the $1,300 that the Dealers charged in a single, upfront payment.

Even if a Borrower could afford the full price, the Dealers were prohibited by federal regulation from accepting upfront payment before performing services for the Borrower.

For that reason, to complete the Scheme, the Dealers referred Borrowers to EAC to finance the purchase. The Dealers conditioned enrollment in the Dealer’s program upon EAC’s acceptance of the Borrower for financing.

To secure Borrowers’ agreement to enroll in the Dealers’ Purported Services, many Dealers quoted Borrowers a monthly cost that the Borrower would owe if he or she enrolled in the Services. The single quoted amount included both an estimated future monthly student loan payment due to the Borrower’s Servicer under Income Driven Repayment and the monthly payment obligation to EAC. Yet the Dealers misrepresented the structure of this payment, often telling Borrowers that this payment would only be applied toward their federal student loan balance and failing to disclose that a portion of this payment goes to EAC to pay for the financing.

When Dealers did identify that Borrowers would be making a separate payment on top of their student loan payments, the Dealers often falsely stated that the payment to EAC constituted a “payment plan” to purchase the Services.

For example, SLF Center told Ms. Williams that she could pay her $1,377 purchase price through a down payment of $150 and a payment plan of $49 per month. Integra told Mr. Turner that he could pay his $1,314 purchase price through a payment plan of $39 per month.

The Dealers concealed from Borrowers that the financing from EAC was in the form of a new Deceptive Loan with 21% interest.

The Dealers concealed from Borrowers that the financing from EAC would appear on Borrowers’ credit reports as a maxed out line of credit.

The Dealers made these misrepresentations and material omissions knowing they did not accurately or completely describe the terms of EAC’s financing, and with intent to secure Borrowers’ agreement to accept financing with EAC.

For example, Integra told Mr. Turner that he would have no payments for 75 days, then would have a monthly payment of $39.42. Integra did not disclose to Mr. Turner that these monthly payments were not being applied to Mr. Turner’s student loan balance and did not disclose that these payments were towards the new Deceptive Loan from EAC with 21% interest or that the Deceptive Loan would appear on his credit report as a maxed out line of credit.

SLF Center did not disclose to Ms. Williams that her monthly payments of $49 were not being applied to her student loan balance and did not disclose that these payments were towards the new Deceptive Loan from EAC with 21% interest or that the Deceptive Loan would appear on her credit report as a maxed out line of credit.”

EAC’s Deceptive Loans

All document packets sent by EAC to the Borrowers were virtually identical except for the Borrower’s information, the name of the Dealer, and the description and price of the specific Purported Services purchased. Each document packet sent by EAC was stamped on the first page with EAC’s name and corporate logo. Once completed, the document packet contained a stamp on each page stating that “[t]he original document is owned by Equitable Acceptance.”

EAC communicated with Borrowers about the document packet by email and phone. Many Borrowers with whom EAC communicated live in New York.

The EAC document packet contained a “Purchase Agreement,” which set forth the terms of the Borrower’s purchase of Purported Services from the Dealer, including total sales price, down payment, unpaid balance, and monthly payment. The Purchase Agreement conditioned the Borrower’s purchase of the Purported Services on the Purchase Agreement being “accepted under the Revolving Credit Plan.”

The document packet also contained an “Equitable Acceptance Revolving Credit Plan” (the “Credit Plan”).

On information and belief, EAC purposefully drafted the Credit Plan with the intent to deny that it originated any loans, in order to avoid liability arising from the deceptive and usurious nature of the loans.

As a result, the Credit Plan is so ambiguous about the identity of any purported extender of credit and the establishment of a loan that it does not create any enforceable obligation at all.

No provision of the Credit Plan purports to extend credit, or states the amount of credit purportedly being extended.

No provision of the Credit Plan identifies any party purportedly extending credit.

The Credit Plan states: “I [the Borrower] am executing my Revolving Credit Plan with you (the ‘Credit Plan’).” It also states that purchases will be debited against “the line of credit that you (meaning only Equitable Acceptance Corporation or any other sales organization to which this agreement is assigned and accepted) may establish hereunder.” Other provisions of the Credit Plan, however, describe EAC as an assignee.

The Credit Plan is labeled as an Equitable Acceptance document, but the Dealer’s name and a “Rep ID” number appear in the signature area of the document.

The Credit Plan provides for an annual interest rate of 20.99% (or, in what is, on information and belief, a small minority of contracts, 17.99%). It sets forth the number of months it will take the Borrower to pay off the balance by making the minimum monthly payments, but does not state the amount of the minimum monthly payments. It also provides for a $20 fee for late payments or payments returned due to insufficient funds.

READ  Consumer Complaint - Equitable Acceptance and Performance SLC - October 31, 2018

The Credit Plan states that as a holder, EAC “is subject to all claims and defenses” that any Borrower “could assert against the seller of goods or services” obtained “with the proceeds” of the Credit Plan, that is, against the Dealer.

The packet also includes an “Equitable Acceptance Auto Pay Terms of Use,” by which the Borrower authorized EAC to make monthly electronic ACH debits from the Borrower’s bank account in the amount of the “Monthly Payment” set forth in the Purchase Agreement. EAC charges a 4% surcharge on any credit or debit card payment not made through auto pay.

To the extent the Credit Plan creates any credit obligation at all, that credit obligation is deceptive to the Borrower.”

EAC Orcestrated the Scheme

The complaint states Equitable Acceptance allegedly played a larger role in the overall approach with dealers.

“EAC and Henn knew about, and actively participated in, the misrepresentations and material omissions used by the Dealers in the sales and marketing process. At various times, including in December 2016 and October 2017, EAC, at Henn’s direction, convened in-person meetings with multiple Dealers and discussed the Dealers’ marketing practices.”

“Sometimes, EAC is directly involved in providing Services to Borrowers. For example, in approximately late August 2018, EAC emailed many Borrowers who had been enrolled by various other Dealers, including Jordan M. and Pamela S.: “[W]e have arranged for [Dealer] TitanPrep to assist you with any remaining student loan payment assistance services to which you are still entitled. This is a good thing. TitanPrep successfully services thousands of student loan payment customers, and we find them to be a professional, customer service oriented company.” The email also stated: “Our goal is simple – to ensure you receive all of the help and assistance to which you are entitled with your federal student loans.”

The Master Dealer Agreement between EAC and each Dealer provides that EAC will make an upfront payment to the Dealer for each Borrower enrolled. This upfront payment allowed Dealers to obtain cash immediately for each new customer, while sidestepping the federal prohibition against telemarketers directly charging Borrowers for services that have not yet been provided.

On EAC’s website, which it uses to recruit new Dealers, EAC stated that this “fast funding” pumps money into the Dealer’s “revenue stream.”

Borrowers’ later payments, including interest payments and late fees, are made to EAC directly.

The Master Dealer Agreement also has a “recourse” provision that allows EAC to sell a Borrower’s payment obligation to the Dealer at EAC’s sole option.

When EAC invokes the recourse provision, the Dealer must pay EAC an amount to cover the Borrower’s outstanding balance on the obligation. The Dealer may pay this amount directly or out of a reserve fund of the Dealer’s money that EAC holds.

The Dealers, EAC, and Henn knowingly took and continue to take steps to conceal their fraud because Defendants’ Scheme depends on the continued active participation of the Dealers, EAC, and Henn.”

“EAC repeatedly states that it “purchased” or “acquired” the Borrowers’ contracts from the Dealers. This statement is false. In fact, to the extent the Credit Plan creates any loan obligation, EAC is the party that extended credit to the Borrower.

EAC threatens Borrowers who complain or who miss payments with negative credit reporting, to induce those Borrowers to continue making payments to EAC.

EAC provides a deceptive “Release” to certain Borrowers who complain, in which the Borrower must waive all claims against EAC and its affiliates in exchange for a release of any financial obligation to EAC. EAC intends the Borrowers to understand that upon signing the Release, they will no longer owe any payment obligation relating to their EAC account. But before or after the Borrower signs the Release, EAC sells the payment obligation to the Dealer under the recourse provision of the Master Dealer Agreement. The Dealer, unaffected by the Release, may continue to collect on that Borrower’s obligation. Borrowers who EAC successfully pressures into such an agreement have received nothing of value in exchange for purportedly releasing EAC from claims.

For example, on October 24, 2018, Borrower Mark H. complained to the CFPB that “Equitable Acceptance has not contacted [my Servicer], and is taking money from me that does not benefit me.” On October 29, 2018, EAC responded to the CFPB, stating that if Mark would sign a Release, EAC would “cancel his contract with EAC [and] refund his payments.” But the next day, after Mark requested such a Release, EAC’s general counsel Daniel Hill wrote in an email to him that “Equitable is unable to refund any payments.” Mr. Hill wrote to Mark on October 30, 2018, that upon Mark signing the Release, EAC would sell his debt obligation to the Dealer, which “will mean . . . that your promise to pay [the Dealer] still exists; Equitable just would no longer own it. I am fairly confident [the Dealer’s] position will be that you . . . have to pay.”

“EAC’s vendors told Henn that the Scheme was fraudulent. On multiple occasions, such vendors refused to work with EAC on the basis that the Scheme being perpetrated by the Dealers and EAC was defrauding Borrowers, including by putting Henn on notice of potential misrepresentations about the ability to promise loan forgiveness.

As examples:

  • From about July to September 2016, Henn worked with a vendor to arrange sending credit offers directly to consumers. The vendor met with three Dealers’ management and toured their offices. On or about September 29, 2016, he wrote to Henn: “If you were to make firm offers of credit to generate leads for the 3 [Dealers] involved, then it would likely just be a matter of time before EAC would be sued by multiple AGs, the CFPB and FTC. These [Dealers] would put EAC out of business. When [you are] . . . an indirect lender with no licensing and working with insolvent, shoe string companies like the three [Dealers] who are losing money and are desperate to do anything including breaking the law, then you open yourself up to considerable risk.”
  • From about May to September 2017, Henn worked with a different vendor to send credit offers to Borrowers. The vendor reviewed a proposed offer drafted by Dealer Student Advocates, which stated that a Borrower should “call now . . . to determine if your federal student loans are eligible for forgiveness.” On or about August 14, 2017, the vendor told Henn that its “compliance team” recommended striking the reference to “forgiveness” and revising the offer to instead read “call now . . . to determine how best to manage your federal student loans.”
  • On or about September 2016, EAC announced to Dealers that it could no longer accept Borrower payments by credit card for student loan debt relief accounts only (this did not apply to EAC’s non student loan business). Henn explained that EAC changed the policy as a result of EAC’s banks and credit card payment processors “closing down” EAC’s ability to process credit card payments, which they did because “a large number [of Borrowers] are claiming fraud on . . . payments” on EAC’s student loan debt relief accounts. Henn explained that many Borrowers bought the Services “and pa[id] for it on a [credit card] and then claim[ed] it was fraudulently done.”
  • On or about March 2017, EAC’s payment processor told Henn that the processor was unhappy with EAC’s student loan debt relief business. Henn contacted a vendor to find a different payment processor. On or about March 15, 2017, the vendor informed Henn that “[out] of the 37 [payment] processors in my network there are only 2 that will board your account considering the student loan [business] in your portfolio. However, they will not board this at low-risk rates. . . .”

Dealers told Henn that certain Dealers were engaged in illegal activity.

  • On or about January 9, 2017, a representative of Dealer Student Financial Help Consultants, told Henn that it sought to change the structure of its business “to shelter[] [it] from any vulnerability to regulation.”
  • On or about September 3, 2017, , a representative of Dealer Titan Prep, warned Henn that “[t]here seems to be some illegal activity with my client data.”
  • On or about October 26, 2017, , a representative of Dealer Manhattan Beach Venture, told Henn: “Since I’ve started this business I haven’t really seen a truly COMPLIANT model. . . . Advertising . . . can NOT be deceptive or misleading. . . . The majority of call centers use third party lead generators and don’t actually know what advertising made their phone ring and we’ve learned that most of the advertising being used is misleading and violates [federal] regulations. . . . The sales/call center needs to follow through with this deceptive, non-misleading approach when talking with the potential client. This means educating the client briefly as to what the dealer does on their behalf without promising forgiveness, reduction in payment, or any other outcome . . . or represent that they are [somehow] in contact with the servicer or part of any government agency. . . . What’s very important as well is to make ABSOLUTELY CLEAR what the fee structure is and what it is for. It is for the dealer’s service ONLY. . . . Between the FTC and AG issues surrounding this industry along with the countless defaults and complaints coming from the client base, this can only end poorly.”
  • On or about November 29, 2017, Henn was informed by , who was a representative of a Dealer or prospective Dealer, that “[i]t is common practice for [Dealers] to call in [to Servicers] and impersonate the client. . . . This could easily be construed as felony fraud being that they are federal loans.”
  • On or about December 6, 2017, , who was a representative of a Dealer or prospective Dealer, told Henn that “[o]ther [Dealers] . . . are NOT doing it legally — they imposter [sic] customers and other things.”

Outside attorneys repeatedly warned Henn that EAC’s Credit Plans might be unlawful.

As examples:

  • On or about January 18, 2016, Henn reviewed an analysis of EAC’s business model from an attorney from . The attorney asked: “How could [this business] ever comply with []TILA disclosures?”
  • On or about April 8, 2016, Henn reviewed the same attorney’s analysis of EAC’s Credit Plans. The attorney asked: “[The Credit Plan] states consumer may make future purchases under the terms of this agreement. Is that accurate? To what extent? . . . Is the cost of the [student loan] services provided by [the Dealer] the only ‘product’ the loan is available for?”
  • On or about May 13, 2016, Henn reviewed another attorney’s analysis of EAC’s Credit Plans. That attorney stated that EAC must “obtain[] licensure to provide credit services/loans,” and also stated that EAC’s three-day cancellation policy “is problematic given that the subject of the financing is student loan consolidation. The consumer needs to be able to cancel and receive a refund.”
  • On or about October 30, 2017, Henn reviewed an email from stating that a regulatory attorney at had “a LOT of concern for EAC at this time” and that other “VERY credible lawyers” had said that same thing.”

Were Dealers Also Victims of Equitable Acceptance?

If we believe the statements made in the complaint, The CEO of Equitable Acceptance played an involved role in bringing student loan assistance dealers into the scheme.

READ  Student Loan Advocates - Equitable Acceptance - Consumer Complaint - August 14, 2017

“Henn coordinated every aspect of Dealers’ participation in the Scheme.

Henn personally recruited certain Dealers.

Henn hired, managed, and directed brokers and coordinated with them to recruit other Dealers to participate in the Scheme.

One of the brokers that Henn hired and supervised was . Henn spoke to multiple times per week and exchanged hundreds of emails with him over the course of approximately three years about recruitment of Dealers. At certain times, all new Dealer applicants were required to go through to reach Henn.

All Dealers who sought to participate in the Scheme by referring Borrowers to EAC to finance the purchase of Services were required to submit an application to EAC. Only if the application was approved would a Dealer be permitted to enter a Master Dealer Agreement.

Henn reviewed application packages submitted by prospective Dealers. These packages included the Dealer’s history of consumer complaints and their websites. Henn personally tracked down missing application paperwork from Dealers.

Henn coordinated EAC’s process for accepting or declining new Dealer applicants. On information and belief, Henn personally approved or rejected each Dealer application.

On information and belief, Henn accepted new Dealer applicants to perpetuate the Scheme, as enrolling new Dealers allowed Henn to expand the Scheme’s scope and to enroll more Borrowers in the Scheme. In addition, Henn knew that Dealers were likely to close or disappear, and thus new Dealers were necessary in order to recruit additional Borrowers to take out Credit Plans from EAC.

Henn reviewed and approved the language of key documents relating to the Dealers.

Henn, along with EAC’s attorney, drafted the Master Dealer Agreement that EAC entered into with each Dealer.

Henn solicited Dealers’ input on the Master Dealer Agreement and discussed its terms with the Dealers.

Henn was deeply involved in the day-to-day operations of Dealers.

Henn spoke with Dealers on the phone on a daily basis regarding the Scheme.

Henn attended and/or hosted many in-person meetings with Dealers regarding the Scheme. Henn traveled to California to attend an in-person meeting with a Dealer in February 2016. Henn attended in-person meetings with Dealers in December 2016, November 2017, and March 2018. On information and belief, Henn attended in-person meetings with Dealers in August 2016 and April 2018, among other dates.

For example, in October 2017, EAC hosted an in-person meeting for Dealers in EAC’s Minneapolis Headquarters. The meeting was mandatory, in that Dealers that did not attend would no longer be able to participate in obtaining EAC financing as to certain Borrowers. Henn attended and hosted this meeting. Dealers’ performances, EAC’s future business model, marketing, and compliance issues were scheduled to be discussed. During the meeting, Henn expressed to Dealers his concern about borrower complaints.

Henn controlled the material terms of Dealers’ sale of Purported Services to Borrowers.

For example, Henn controlled the amount and number of monthly payments Dealers required from Borrowers and the total contract price.

Henn required that Dealers seeking to structure Borrowers’ payments differently obtain his approval.

EAC, at Henn’s direction, implemented a new payment structure for all Dealers beginning in November 2017. The Dealers understood that this new payment structure was a mandatory directive from Henn and those that wanted to change the implementation timeline sought his personal approval.

Henn controlled the Purported Services that Dealers offered Borrowers.

Henn required that Dealers seeking to structure the Purported Services differently obtain his approval. For example, one Dealer sought Henn’s approval to have Borrowers submit forms to their Servicers on their own, rather than have the Dealer submit forms to the Servicer on the Borrower’s behalf.

On information and belief, Henn required all Dealers to use the same terms in the document packets they sent to Borrowers. See supra ¶ 168.

Henn reviewed and approved the terms of these agreements, including statements that “many [Borrowers] are stuck with their lender not offering legitimate help” and “[i]n many cases, we are successful in assisting borrowers . . . where their lenders had previously denied them based on illegitimate reasons.”

On information and belief, Henn approved the requirement that all Dealers record a “verification” portion of any call with a Borrower being referred to EAC for financing; that the Dealer use a script approved by EAC to do so; and that EAC transmit the audio recording of the verification to EAC. See supra ¶ 229.

Henn reviewed specific “verification” scripts proposed by Dealers. On information and belief, Henn directed changes to those scripts.

By requiring Dealers to use the verification scripts, as revised by Henn, EAC could later deny that Borrowers had been misled about the Purported Services and EAC financing, which helped perpetuate the Scheme by putting off Borrowers who complained.

Henn communicated with Dealers about EAC’s “reinstatement” policy that would allow a Borrower past-due on payments to begin making payments again.

Henn communicated with Dealers about EAC’s calculation of interest on Borrower accounts.

Henn communicated with Dealers about EAC’s standards of creditworthiness for Borrowers.

Henn managed, and communicated with Dealers about, EAC’s policies regarding Dealers’ communication with Borrowers.

For example, in December 2017, EAC directed Dealers that they “may not use Equitable’s name, phone number, email address, or any other information when you are contacting any federal student loan debtor for any reason.” On information and belief, EAC did so at the direction of Henn.

Henn directed Dealers’ collections efforts with respect to Borrowers who did not make payments. For example, Henn reviewed language of Dealers’ collection emails to Borrowers.

Henn was involved in the minutiae of the Dealers’ day to day operations with respect to individual Borrowers.

For example, Dealers often contacted Henn to request that EAC take specific actions on individual Borrowers’ accounts, such as extension of payment deadlines or cancellation or chargeback of individual accounts. Henn personally responded to these requests and directed them to EAC staff.

Henn worked directly with Dealers and EAC’s attorney to develop a “client benefit statement”—a statement that the Borrower would receive directly from EAC, describing the Borrower’s purported benefits from the Dealer’s Services. Such a “client benefit statement” could be used to conceal the worthlessness of the Purported Services, and thus could be used to perpetuate the Scheme.

Henn reviewed multiple drafts of the client benefit statement that approximated the Borrower’s monthly payment under a standard repayment plan (regardless of whether the Borrower was in fact enrolled in such a plan) and used it to calculate the Borrower’s purported “total savings.” These purported “total savings” did not accurately reflect the value of the Dealers’ Services. The client benefit statement drafts Henn reviewed also characterized the loan payments on EAC’s Credit Plan as an “enrollment fee” on a “federal program.”

On information and belief, Henn approved a version of the client benefit statement. Henn directed EAC staff to set up the automatic creation of the client benefit statement in EAC’s software.

Henn sought access to, and, on information and belief did access, certain Dealers’ full records about Borrower accounts. Henn reviewed, and approved or denied, certain requests from Dealers to change the way this data was maintained.

As examples:

  • On or around November 15, 2016, Henn sought to obtain access to certain Dealers’ electronic records in this system so that EAC could access all information about Borrowers that Dealers possessed.
  • On or around November 18, 2016, Henn reviewed contractual language that would allow access to such data for certain Dealers.
  • On or around January 3, 2017, Henn was trained on how to access certain Dealers’ data management system and discussed the use of this system with the Dealers.
  • On or around November 1, 2017, Henn directed certain Dealers to integrate a quality control function into their data management system.
  • On or around November 27, 2017, Henn held a phone call with a Dealer who sought Henn’s approval to build in a feature to the software that would automatically log in to a Borrower’s studentloans.gov account.
  • On or around November 29, 2017, Henn emailed the vendor who managed certain Dealers’ data systems seeking access to Dealers’ data.

Henn reviewed, and approved or denied, Dealers’ requests to change the individuals who were able to access EAC’s account information, such as after a change of control of the Dealer.

By doing so, EAC and Henn would continue to have access to the records in the event Dealers closed or disappeared.

Henn regularly reviewed Borrower complaints lodged against Dealers. Henn coordinated with Dealers to respond to such complaints.

Henn directed Dealers that all BBB complaints needed to be answered.

On information and belief, Henn directed the Dealers’ responses to complaints in order to perpetuate the Scheme, by encouraging existing Borrowers to continue to pay under the Credit Plans, avoiding public complaints that might deter new Borrowers from enrolling, and avoiding scrutiny by law enforcement.

Henn managed the financial structure of the Scheme. Henn had control over EAC’s finances. Henn had control over a significant portion of the Dealers’ finances because he controlled EAC’s “reserve” account for each Dealer.

Henn controlled EAC’s financial relationship with the Dealers and the flow of funds between EAC and the Dealers.

Henn knew that the Dealers obtained EAC’s financing for Borrowers in order for the Dealers to evade the Telemarketing Sales Rule’s prohibition on up-front payments to providers of debt relief services.

For example, Henn was told by a Dealer that the “attractiveness of financing is the advance” payment from EAC to the Dealer.

Henn set the amount that EAC would pay the Dealers for each Borrower and the schedule under which these payments would be made.

Henn managed, and communicated with Dealers about, EAC’s “chargeback” policy and chargeback amounts. The “chargeback amount” was the amount a Dealer’s account would be credited when EAC exercised the “recourse” option in its contact with the Dealer and sold the contract to the Dealer.

Henn managed, and communicated with Dealers about, the status of Dealers’ payouts under their contracts with EAC and the amount being held by EAC in “reserve” accounts.

Henn reviewed and approved agreements that Dealers made with their own contractors. For example, Henn reviewed and approved agreements with “processing companies” that certain Dealers retained to provide the Purported Services to Borrowers. Henn communicated extensively with Dealers regarding these processing companies.

Henn was actively involved in the strategic management of Dealers’ businesses in participating in the Scheme. For example, one Dealer turned to Henn for advice on the “short term future” of the Dealer as EAC was “a huge part of the equation.”

Henn reviewed, and approved or denied, Dealers’ requests to sell Borrowers’ contracts among each other.

Henn provided material assistance to the Dealers to enable their continued participation in the Scheme.

Henn issued promissory notes to Dealers through which EAC lent Dealers hundreds of thousands of dollars. Henn controlled the repayment terms of those notes.”

You can read the full complaint available now, below.

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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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