First came the companies claiming they could reduce consumers’ credit card debt. Next were the outfits saying they could renegotiate mortgages or save homes from foreclosure. Now that people are struggling with the trillion-dollar burden of student loan debt, some marketers are making dramatic promises about reduced payments and loan forgiveness – representations the FTC alleges are false or misleading.
Through web-based ads and telemarketing campaigns, Florida-based Strategic Student Solutions claimed consumers could “save 60% or MORE” on their monthly payments and even touted “payments as low as $0 Monthly.” According to an FTC lawsuit, the defendants’ telemarketers told prospective customers the company could enroll them in student loan forgiveness programs or other programs to reduce monthly payments or loan balances. In some instances, the defendants said those programs would forgive student loans outright after only three years of monthly payments. In one email cited in the FTC’s complaint, the company told a consumer it “will get you preapproved for Federal Government Programs that will forgive or eliminate your Federal Student loan . . . we are a forgiveness program that will ensure forgiveness.”
An additional perk the defendants promised: purported credit repair services. “For years, we have assisted thousands of consumers not only to repair or delete erroneous information from their credit reports, but also to rebuild their credit, providing legal alternatives to increase their FICO scores.”
To get the benefits Strategic Student Solutions promised, consumers coughed up initial fees ranging from $599 to $1200 with additional monthly payments of about $50. But according to the complaint, rather than applying those monthly payments to consumers’ student loans, the defendants typically pocketed them – information the FTC alleges the company buried on the very last page of a contract that often ran as long as 20 pages.
What about those government loan forgiveness programs the defendants prominently pitched? According to the FTC, they come with major commitments or apply only in very limited circumstances. For example, the Department of Education’s Teacher Loan Forgiveness program requires five years of employment in certain low-income schools. Other programs apply only to people who experience a total and permanent disability or whose schools shut down while they were still enrolled. Options like the federal income-driven repayment program may discharge what’s left of a loan, but only after 20-25 years of payments – a far cry from the three-year forgiveness the defendants claimed.
The complaint against Strategic Student Solutions, company president Dave Green, and related businesses challenges a number of the defendants’ loan forgiveness and balance and payment reduction claims as deceptive. The lawsuit also alleges that the defendants made misleading credit repair representations, violated the Credit Repair Organizations Act, and violated the Telemarketing Sales Rule’s ban on advance fees for debt relief services.
At the FTC’s request, a federal court in Florida has temporarily halted the operation. The FTC wants to put a once-and-for-all stop to the allegedly illegal practices and is requiesting refunds for consumers. Even at this preliminary stage, the case serves up three reminders about student loans:
- Companies making student loan debt relief claims must pass the truth test. Some marketers say they have solutions for the millions of Americans struggling with student loan debt. Claims of that nature – like any other objective representation – must be backed by solid proof.
- Results first, payment later. The Telemarketing Sales Rule makes it illegal for sellers or telemarketers to get up-front fees for debt relief services. Reread the rule for a recap of what businesses have to achieve on consumers’ behalf before they can ask for so much as one thin dime.
- Considering a debt relief service? Do your homework first. Chances are you have employees, friends, or family members struggling to pay their student loans. Share advice from the FTC about evaluating student loan debt relief claims.