FTC and student loan debt relief operation agree to permanent injunction

Federal Issues FTC FTC Act Telemarketing and Consumer Fraud and Abuse Prevention Act Student Lending Debt Relief Enforcement

On March 30, the FTC announced a settlement with three student loan debt relief companies and their owner for violating the FTC Act and the Telemarketing and Consumer Fraud and Abuse Act by allegedly engaging in deceptive practices when marketing and selling their debt relief services. The complaint alleges that the defendants, among other things, (i) falsely promised consumers that they could permanently lower or eliminate student loans by enrolling in an income-driven repayment plan for an upfront fee; (ii) offered consumers incentives for positive reviews; (iii) failed to advise consumers to state that they were offered payment for reviews, and failed to disclose that consumers were paid when responding to reviews; and (iv) incorrectly advised consumers on how to report family sizes on applications for student loan debt relief, or falsified consumers’ family size without their knowledge.

According to the FTC, the defendants agreed to a pending stipulated final order that would, among other things, permanently ban the defendants from providing unsecured debt relief services and from making misrepresentations or unsubstantiated claims related to any products and services. However, the defendants will be allowed to continue to assist existing consumers prepare and submit applications to the Department of Education as part of the yearly recertification process, provided the consumers have provided an opt-in confirmation. The stipulated order also requires the defendants to pay $350,000, with the total judgment of approximately $23.9 million suspended due to inability to pay.