The Federal Trade Commission has reached a settlement with the a group of companies and the individuals behind them that were accused of violating the Telemarketing Sales Rule, the Gramm-Leach-Bliley Act, and the Federal Trade Commission Act by marketing student loan forgiveness programs that made false promises and collected millions in illegal upfront fees. The defendants will be banned from the debt relief industry and imposes a monetary penalty of $7.4 million, most of which is suspended because the defendants can’t afford to pay it.
The Background: The defendants collected nearly $9 million in upfront fees from individuals looking for relief from their student loan payments. The individuals were promised that their student loan payments would be lowered or completely eliminated, but first had to pay a fee for services that were available through the Department of Education.
- Individuals were told to stop communicating with the servicers of their student loans and provided their bank account, credit card, or debit card information to process the upfront fees.
- The defendants were accused of continuing their alleged scam even after settling claims with the Attorney General of Minnesota that they misrepresented their services, collected unlawful advance fees, and failed to secure the appropriate licenses.
The Settlement: The defendants are permanently barred from making any misrepresentations about financial products and services and from using false statements to collect consumers’ financial information.
- Rather than pay the $7.4 million judgment, the defendants will have to turn over any assets from a number of accounts.
- Litigation will continue against one defendant who was not part of the settlement.