Feds, 11 states crack down on companies selling student debt relief

PHOTO: The Federal Trade Commission headquarters in Washington.Bill O'Leary/The Washington Post via Getty Images
The Federal Trade Commission headquarters in Washington.

Federal and state authorities are cracking down on multiple purveyors of so-called “student loan debt relief,” alleging that the companies took in more than $95 million in illegal up-front fees from American consumers in exchange for little or no help.

The actions, announced Friday as “Operation Game of Loans” by the Federal Trade Commission and attorneys general in 11 states and the District of Columbia, include five new cases, one new judgment in favor of the FTC and a preliminary injunction entered in a case filed earlier this year.

Student loan debt is reaching crisis levels, with 42 million Americans together owing $1.4 trillion for their education loans.

Officials say the debt relief businesses employed a variety of deceptions, including pretending to be affiliated with a federal debt relief program or a loan servicer, falsely promising to reduce or forgive debt and charging illegal upfront fees. Some of the businesses would invoke real federal debt relief programs – but fail to mention that these programs are free to apply for, narrowly designed and most consumers do not qualify.

States involved in the crackdown were Colorado, Florida, Illinois, Kansas, Maryland, North Carolina, North Dakota, Oregon, Pennsylvania, Texas and Washington, along with the District of Columbia, but the companies operated in other states as well.

Student loans are the second-largest segment of consumer debt after mortgages. In past years, homeowners were targeted with similar empty promises of relief by fraudulent “mortgage rescue” companies, a pervasive consumer issue the FTC has tried to combat and ABC News has covered in recent years.

The FTC says borrowers should be wary of anyone who promises they can reduce or wipe out federal student debt. For accurate information, including repayment plans and a calculator, the government advises consumers to start here.

Borrowers should steer clear of any business that wants an upfront fee or their personal FSA ID username and password, the FTC says. More consumer advice is here.

The five new cases involve 30 defendants. In each case, the feds obtained temporary restraining orders halting the alleged schemes and freezing assets.

The companies include: A1 DocPrep. Inc., based in Los Angeles; American Student Loan Consolidators, based in Deerfield Beach, Fla.; Alliance Document Preparation, based in Los Angeles; Student Debt Doctor, based in Fort Lauderdale, Fla.; and Student Debt Relief Group, based in Los Angeles. Some of the companies did businesses under multiple different names.

In addition to the five new cases announced Friday, the FTC was granted summary judgment in a case against Student Aid Center, based in Doral, Fla., and won a stipulated preliminary injunction in its case against Strategic Student Solutions, based in Boca Raton, Fla.

Efforts to reach the companies for comment were unsuccessful.

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