Consumer Finance Insights
December 7, 2018

FTC Settlements Ban Student Loan Debt Relief Operators

On December 7, 2018, the Federal Trade Commission (“FTC”) announced that the U.S. District Court for the Southern District of Florida had entered stipulated orders banning the operators of two Florida-based student loan debt relief providers from the debt relief business, the latest actions from the Operation Game of Loans enforcement initiative targeting alleged deceptive student loan debt relief schemes.  The FTC alleged that the defendants collected illegal upfront fees and falsely promised to help some consumers enroll in government programs that would reduce or forgive their student loan debt, in violation of Section 5(a) of the Federal Trade Commission Act, 15 U.S.C. § 45(a), and the Telemarketing Sales Rule, 16 C.F.R. § 310.

The first settlement resolves allegations that a debt relief company illegally collected at least $7 million from consumers struggling to pay student loan debt.  Under the stipulated order, the defendants are prohibited from making misrepresentations related to financial products or services, and are required to pay approximately $2.2 million.

The second settlement resolves allegations that a debt relief company pretended to be affiliated with the U.S. Department of Education or with consumers’ loan servicers, and tricked consumers into believing that the illegal upfront fees of up to $899 were being used to pay off their student loans.  The FTC alleged that the defendants collected at least $23 million from student loan borrowers by falsely promising loan forgiveness, lower monthly payments, and reduced interest rates.  The stipulated order requires the defendants to pay approximately $1.3 million, including turning over assets that are otherwise not recoverable through litigation.

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