Consumer Finance Insights
July 18, 2019

FTC Secures TRO Against Alleged Student Loan Debt Relief Scheme

On July 11, 2019, the Federal Trade Commission (FTC) announced that it had obtained a temporary restraining order against defendants operating an alleged student loan debt relief scheme that, according to the FTC, tricked thousands of consumers by making false claims that it would service and pay down their student loans, causing consumer harm of at least $23 million.

In its complaint, the FTC alleged that the company violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6101-6108, and the Telemarketing Sales Rule (TSR), 16 C.F.R. § 310, by luring consumers into paying illegal advanced fees with false promises to lower their monthly student loan payments, and by tricking consumers into submitting their monthly payments directly to the defendants by falsely claiming to take over servicing of the consumers’ loans, whereas in many cases defendants actually diverted consumers’ payments to themselves.  The temporary restraining order froze the defendants’ assets, enjoined them from engaging in the illegal debt relief services, and appointed a receiver to take control of the defendant entities’ operations.

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