Consumer Finance Insights
February 13, 2018

FTC Accuses Student Loan Debt Relief Operation of Deceiving Consumers

​On February 7, 2018, the Federal Trade Commission (“FTC”) announced an enforcement action against a student loan debt relief operation, claiming it deceived consumers out of $28 million by falsely promising that their monthly payments would go towards their student loans.

In the complaint, filed in the U.S. District Court for the Northern District of California, the FTC alleges that defendants violated the Federal Trade Commission Act, 15 U.S.C. § 54(a) (the “FTC Act”) and the FTC’s Telemarketing Sales Rule (“TSR”) through deceptive marketing and sale of student loan debt relief services.  The FTC claims the defendants sent mailers to consumers claiming they were eligible for federal programs that would reduce monthly loan payments or forgive their student loan debt.  The defendants would collect enrollment fees of up to $800, purportedly to enroll consumers in federal debt relief programs.  Defendants also allegedly collected monthly payments that consumers thought were being applied to pay down their loans, but were not.  Some consumers allegedly ended up with higher debt than they started with after “enrolling.”  According to the FTC, defendants also used recorded telephone messages to communicate with consumers that contained false or unsubstantiated representations about eligibility for federal debt relief programs.

The FTC seeks a permanent injunction and other equitable relief, including restitution, the refund of monies paid, and disgorgement of ill-gotten monies.

This case is the eighth action the FTC has taken in “Operation Game of Loans,” a joint initiative between the FTC and state law enforcement to crackdown on student loan debt relief scams.