On January 22, New York Governor Andrew Cuomo announced that in its first action, the newly created Student Protection Unit issued thirteen subpoenas to student debt relief companies as part of an investigation into allegations of improper fees and misleading advertising. The Student Protection Unit is a division within the Department of Financial Services that serves as a consumer watchdog for the student loan and debt relief industry. In connection with the announcement of the subpoenas, Benjamin M. Lawsky, the Superintendent of Financial Services, stated that the “Student Protection Unit will vigorously investigate the [student loan and debt relief] industry and any other potential violations of students’ consumer protection rights.” The subpoenas were issued in response to concerns that student debt relief companies were advertising and charging fees for their services in assisting students with consolidating multiple loans into a single loan, when the same services are available to students for free through the U.S. Department of Education. According to Gov. Cuomo’s office, companies may have been charging high upfront fees for helping to place students into otherwise free government programs. The Student Protection Unit is also investigating concerns that companies are misleading students and consumers about their abilities to offer relief for private student loans. The subpoenas requested a variety of documents, including advertising materials, fee schedules, and consumer disclosures. The subpoenas may be a bellwether that other state and federal government investigations into the industry could be forthcoming, particularly as the industry continues to garner national attention and was highlighted this week in President Obama’s State of the Union Address as an area of focus for his administration.
Blog LenderLaw Watch April 17, 2014