FTC Nationwide Crackdown against Debt Relief Scams

The Federal Trade Commission teamed up with State Attorneys General from 11 different states and D.C to coordinate a crackdown against student loan debt relief scams.

The national collaboration dubbed “Operation Game of Loans” included 36 legal actions by the FTC and AGs which allege the companies had scammed up to $95 million in illegal upfront fees. The actions stated the companies targeted financially vulnerable consumers using deceptive advertising to help reduce or forgive student debt. They violated the FTC Act and Telemarketing Sales Rules by pretending to be affiliated with government agencies and false promises to reduce debt, according to the lawsuit. Already there’s a new judgement in favor of the FTC since filing earlier this year.

According to the FTC, student loans are the second largest in the nation after mortgages.  Over 42 million Americans have outstanding student loan balances of $1.4 trillion.

The State law enforcement that participated in Operation Game of Loans are Colorado, Florida, Illinois, Kansas, Maryland, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Washington, and the District of Columbia. Maureen K. Ohlhausen, the FTC Acting Chairman extend gratitude to the State departments, “The FTC is proud to work with state partners to protect consumers from these scams, help them learn how to spot a scam, and let them know where to go for legitimate help.”

The U.S. District Court for the Central District of California has actions filed by the FTC totaling to more than $33 million taken from debt-relief seeking consumers by the entities of A1 DocPrep, Inc., Alliance Document Preparation, and Student Debt Relief Group, collectively.

Largest Debt Relief Scams

One of the companies out of Florida, Student Aid Center, collected more than $35 million in illegal upfront fees from consumers by using false claims of debt relief and tricking them into thinking that the FTC operation was part of the approval process. Another joint action by the FTC and Forida alleges that Strategic Student Solutions took more than $11 Million by using similar misleading tactics including credit repair services that do not exist. The local Southeast Florida Better Business Bureau of West Palm Beach worked with the FTC on the crackdown. Michele Mason, senior vice president of operations for the BBB gave student debt consumers advise,  “You never want to pay a fee up front. You want to make sure that you provide information and see what information they can provide to you without paying a fee in advance.”

Acting Director of the FTC’s Bureau of Consumer Protections, Thomas B. Pahl, echoes the statement, “The law prohibits the collection of upfront payments for people who are purporting to help you with debt relief on your student loans. So don’t pay anyone any money until they actually deliver on their promises.”

Illinois Attorney General Lisa Madigan, whose department worked closely with the FTC operation, stated in a news release, “Student loan debt relief scams are successful because borrowers are not receiving the information they need to repay their loans. Student loan debt relief scams rob borrowers of the money they could be using to pay down their student loan debt.” Madigan announced a lawsuit against two companies accused of violating Illinois law by charging upfront fees for services with misleading claims.

The FTC has updated its consumer education efforts on student loan debt relief scams here, and offer advice,

Consumers should remember that only scammers promise fast loan forgiveness, and that scammers often pretend to be affiliated with the government. And consumers should never pay an upfront fee for help, and should not share their FSA ID—a username and password used to log in to U.S. Department of Education websites—with anyone.

Later this month, the FTC will be holding a Facebook Live session with the offices of the Attorneys General on how to avoid such scams.

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