Consumer Finance Insights
September 6, 2016

Massachusetts AG Settles with Student Debt Relief Company Over Alleged Illegal Fees

On September 1, 2016, the Massachusetts Attorney General (“AG”) announced a settlement with a student loan debt relief company, over allegations the company charged illegal fees to enroll borrowers in income-based repayment plans and other loan modification services.

The company allegedly offered “debt relief” services to borrowers, which included assisting borrowers with enrolling in federal income-based repayment programs, other loan modification services, and assistance negotiating repayment plans on defaulted student loans. The Massachusetts AG alleges, however, that most of these loan modification programs are available for free through the Department of Education’s website. According to the Massachusetts AG, the company charged illegal upfront fees to enroll borrowers in these programs, in violation of Massachusetts’ consumer protection statutes. The company also used a “.US” domain name for its website, which allegedly misled borrowers by suggesting the company was affiliated with the federal government.

The company has agreed to refund more than $160,000 in upfront fees and to change its operating name and website domain name to avoid consumer confusion about its affiliation with the federal government. The company also agreed to discontinue charging upfront fees for student debt relief services, and to disclose in its contracts and promotional materials that it is not affiliated with the federal government and that students can apply for loan modification assistance for three through the federal government’s website. The Massachusetts AG noted that this is the third enforcement action against student debt relief companies in the past 10 months and that it will continue to pursue enforcement actions against the student debt relief “cottage industry.” Consumer Finance Enforcement Watch previously reported on the November 2015 settlements here.