Consumer Finance Insights
May 31, 2017

FTC Files Suit Against Student Debt Relief and Credit Repair Scheme

On May 25, 2017, the Federal Trade Commission (“FTC”) announced that it filed a complaint​ in federal court in the United States District Court for the Southern District of Florida against a student loan debt relief and credit repair company, its affiliated companies, and owner.  The complaint alleged that the defendants operated an unlawful debt relief enterprise that falsely promised consumers with student loans that they could reduce their loan payments or eliminate a portion of their debt through student loan forgiveness of income-based repayment plans. On May 26, 2017, U.S. District Judge William P. Dimitrouleas issued an asset freeze and temporary injunction against Defendants.

Florida Attorney General Pamela Jo Bondi (“Florida AG”) ​​​filed a similar complaint​ against the same defendants in Florida state court, alleging misleading and deceptive business practices under Florida law.

According to the complaints, the company allegedly promised consumers that it would enroll them in loan forgiveness or income-based repayment programs, and that their monthly payments to the company would be applied to their student debt. Consumers paid as much as $1200 in up-front fees for the services. The company allegedly did not put any of the money towards the consumers’ debts and, in some instances, consumers ended up owing more on their student loans than when they initially signed up for the defendants’ programs.  ​The complaints also allege that the owner used the money from consumers to pay for jewelry, casino tabs, mortgage payments, luxury cares, and the construction of a pool.​

The FTC alleges that the Defendants violated the Federal Trade Commission Act (the “FTC Act”), the Telemarketing Sales Rule​, and the Credit Repair Organizations Act. The FTC seeks a permanent injunction and disgorgement of all funds and assets, or the value of the benefit Defendants received from the funds and assets, traceable to Defendants’ deceptive acts or practices.

The Florida AG alleges violations of state consumer protection law, including the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”).​​  The Florida AG is seeking permanent injunctive relief, full restitution, the imposition of civil penalties, an award of attorney’s fees and other equitable relief.

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