Consumer Finance Insights
November 21, 2018

Federal Court Halts California-Based Student Debt Relief Scheme at Request of FTC

On November 20, 2018, the Federal Trade Commission (FTC) announced that a federal court issued an injunction to halt and freeze the assets of a California-based student loan debt relief scheme.

Two weeks prior​​​, the FTC filed a complaint against the operators of the scheme, alleging deceptive acts and practices in violation of Section 5(a) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 45​​(a) and advance fees and material misrepresentations in violation of t​he Telemarketing and Consumer Fraud and Abuse Prevention Act (Telemarketing Act), ​15 U.S.C. §§​ 6101-6108 and the Telemarketing ​Sales Rule, 16 C.F.R. § 310.4(a)(5)(i) and  16 C.F.R. § 310.3(a)(2)(x).  Specifically, the FTC alleged that the defendants, among other things, made deceptive misrepresentations about its ability to reduce or eliminate student loan debt.  The FTC also claimed that the defendants charged illegal advance fees for its debt relief services to consumers that often never received any debt relief.  According to the FTC, one of the operators of the scheme is a “recidivist scammer” and was previously sued in 2015 for similar debt relief activities.

​At the request of the FTC, the U.S. District Court for the Central District of California entered a temporary restraining order that immediately prohibits defendants from engaging in or assisting others engaged in certain debt relief activities, including the sale of any debt relief product or service.  It further requires defendants to provide financial disclosures to the FTC and restrains defendants from, among other things, collecting advance fees, releasing consumer information, and from making further deceptive representations concerning its goods or services.​