FTC Halts Student Loan Debt Relief Scheme
Several defendants in complaint with the United States District Court Central District of California allegedly charged illegal fees to consumers for student loan debt relief.
7/11/2019 8:00 AM
The Federal Trade Commission stopped a student loan debt relief scheme, alleging several defendants charged more than $23 million to thousands of consumers with false claims that it would service and pay down their student loans, according to a news release from the FTC. After the FTC filed a complaint seeking to end the deceptive practices, a federal court temporarily halted the scheme and froze its assets.
According to the FTC’s complaint, since at least 2014, the operators of Mission Hills Federal and Federal Direct Group reportedly had consumers pay hundreds to thousands of dollars in illegal upfront fees with false promises to lower consumers’ monthly student loan payments. The defendants also allegedly tricked consumers into submitting their monthly student loan payments directly to the defendants by falsely claiming to take over servicing the consumers’ loans, according to the FTC news release. In reality, the defendants either only applied minimal payments on consumers’ loans or, in many instances, applied none of the payments to the loans, diverting consumers’ payments to themselves, the FTC reports.
“Debt relief companies can’t collect advance fees or masquerade as federal student loan servicers,” said Andrew Smith, director of the FTC’s Bureau of Consumer Protection in the news release. “Anyone asking for upfront fees to help with student loan debt is likely a scammer, and consumers should hang up and alert the FTC.”
When there are admissible facts evidencing egregious conduct, ACA International supports law enforcement and regulators’ efforts to target bad actors, stop illegitimate debt collection activity and debt relief activity, and safeguard consumer rights by removing known violators from the financial marketplace.
The FTC also alleges that the defendants obtained consumers’ student loan credentials, such as their FSA ID—a username and password used to log in to U.S. Department of Education websites—to log in and change consumers’ contact information, effectively hindering or entirely preventing consumers’ loan servicers from communicating with consumers. Many consumers went months or years before discovering that their student loans were not being repaid, according to the complaint, according to the news release.
The FTC has charged the following defendants with violating Section 5 of the FTC Act and the Telemarketing Sales Rule: Elegant Solutions, Inc. (also doing business as Federal Direct Group); Trend Capital Ltd. (also doing business as Mission Hills Federal); Dark Island Industries, Inc. (also doing business as Federal Direct Group and formerly known as Cosmopolitan Funding, Inc.); Heritage Asset Management, Inc. (also doing business as National Secure Processing); Tribune Management, Inc. (also doing business as The Student Loan Group); and three individual defendants, Mazen Radwan, Rima Radwan, and Dean Robbins.
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