Governor Andrew M. Cuomo announced today that his newly established Student Protection Unit took its first official action by issuing subpoenas to 13 student debt relief companies as part of an investigation into concerns about potentially misleading advertising, improper fees, and other consumer protection problems in that industry.
In particular, the Department of Financial Services’ (DFS) Student Protection Unit is probing concerns that this industry is charging high, improper fees without adequate notice for enrolling students in debt relief programs that are available for free through the federal government.
“The rising tide of student loan debt has made it more important than ever that we put in place strong consumer protections for New York’s students,” Governor Cuomo said. “Any company trying to sell students a raw deal using misleading or deceptive practices should know that we’ll continue to work vigilantly to root out consumer abuse.”
As part of his 2014-15 Executive Budget, Governor Cuomo established a new Student Protection Unit within DFS to serve as a consumer watchdog for New York’s students. The DFS Student Protection Unit is dedicated to investigating potential consumer protection violations and distributing clear information that students can use to help them make smart, long-term financial choices.
Benjamin M. Lawsky, Superintendent of Financial Services, said: “Socking students with high fees for a service that is already available for free through the federal government is an immediate red flag. The Cuomo Administration’s new Student Protection Unit will vigorously investigate this industry and any other potential violations of students’ consumer protection rights.”
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Student debt relief companies typically charge students fees to assist them with consolidating multiple student loans into a single loan. However, the same programs that these companies advertise are often available to borrowers free of charge through the U.S. Department of Education.
Concerns have arisen about whether these private companies are charging improper, high upfront fees for simply funneling students into free government programs. A recent National Consumer Law Center report detailed these and other troubling practices within this industry.
Some companies also offer debt relief services in connection with private student loans. These private debt relief companies may charge inappropriate fees and may misrepresent their ability to obtain the results that they represent they can achieve.
DFS’s Student Protection Unit today issued subpoenas to thirteen student debt relief companies for a range of documents, including advertising materials, contracts, consumer disclosures, and fee schedules. The companies to which DFS issued subpoenas include:
According to the Federal Reserve Bank of New York (FRBNY), the amount of student loan debt nationwide has more than quadrupled in the last decade. FRBNY data also show that in New York the average student debt per borrower is $27,310 – the third highest of any state. Estimates from the FRBNY and the U.S. Consumer Financial Protection Bureau put the total amount of student loan debt outstanding nationwide at approximately $1 trillion.
Any New Yorker who would like to file a complaint with the Cuomo Administration’s Student Protection Unit about a student debt relief company or other potential abuses can contact the Department of Financial Services Consumer Hotline at (212) 480-6400 or (800) 342-3736 for assistance. The Cuomo Administration’s Student Protection Unit has also issued a consumer alert on the DFS website with information on student debt relief companies.
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