Both companies advertised heavily on the radio. Matthew, a New York consumer who did not want his last name used because he is concerned about his legal career, said he called First American after his dad heard their radio ad and thought the company could help with his $200,000 in law school debts.
He said the sales representative quickly charged his debit card for $987, against Matthew’s wishes. After talking to his accountant, Matthew chose not to proceed with the program, but it took weeks of complaining to get a refund.
“They’re preying on people who are scared,” he told ABC News. “People are just looking for any kind of help they can get.”
The companies have racked up scores of complaints at the Better Business Bureau; the consumer organization gives them each an “F” rating.
The lawsuits filed Monday in Illinois allege the companies are in violation of that state’s Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act.
Consumer advocates who’ve fought against fraudulent “mortgage rescue” operations in recent years – and losses to those are reported to be at least $83 million – are concerned that crushing student loan debt is the next area ripe for consumer fraud.
In a 2013 report, the National Consumer Law Center warned that debt settlement companies were making exaggerated promises about how much they could help borrowers and that “such practices severely compound the pain of vulnerable consumers seeking to find resolutions to difficult student debt problems.”
Consumers who are struggling with student loan debt should never pay upfront for help. For information on legitimate sources of free assistance, consumers can contact the Consumer Financial Protection Bureau or the National Consumer Law Center. For problems with a student loan servicer or a debt collector, consumers can also contact the U.S. Department of Education’s Student Loan Ombudsman at (877) 557-2575 or www.ombudsman.ed.gov, or the Consumer Financial Protection Bureau.
As for whether to consolidate loans, borrowers need to think carefully about whether that’s the best choice for them. Consolidation may lengthen the amount of time the loan runs and wipe out benefits associated with the original loans, causing the borrower to pay more in the long run.
If you do choose consolidation, you can apply for it at no charge through the U.S. Department of Education; for more info go to https://studentloans.gov.