FTC sues marketers of student loan “debt relief” – and financer who helped it happen

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Every spring at colleges across the country, many graduates receive a diploma in their hand – and an albatross around their neck. The burden of student loan debt weighs heavily on American families. And given the pressures on cash-strapped employees, businesses say they’re paying a price in productivity. The FTC has brought numerous cases against companies that pitch deceptive student loan “debt relief.” Actions announced by the FTC and the Minnesota Attorney General continue that effort, but come with a twist that should be relevant to those in the financial sector.

Manhattan Beach Venture, LLC, undertook a massive telemarketing campaign to sell purported services to consumers struggling with student loan debt. The pitch was persuasive. According to the complaint, the company’s telemarketers told consumers they qualified under a federal program to get forgiveness for all or part of their student loans or that they could get a permanent reduction in what they paid each month. People just needed to sign up with Manhattan Beach Venture, which would enroll them in the program.

What if consumers – many of whom were already struggling with debt – couldn’t pay the fee to sign up? Manhattan Beach had an answer: People could get financing through a third-party lender, Equitable Acceptance Corporation. And that’s where the FTC and Minnesota AG allege the defendants compounded the consumer injury.

You’ll want to read the complaint to get a feel for the sales tactics the defendants used, but here’s a summary. When a Manhattan Beach telemarketer had an interested consumer on the phone, the telemarketer sent the person a contract via email to sign electronically. If the consumer met Equitable Acceptance’s prescreening requirements for financing, the telemarketer also emailed the consumer a contract with Equitable Acceptance and directed the consumer to sign immediately. The complaint alleges that the consumers walked away from the telemarketing call with a new monthly payment that they thought was going toward their student loans and ultimately loan forgiveness.

But according to the FTC and the Minnesota AG, despite what Manhattan Beach claimed, there was no basis for Manhattan Beach’s promises that consumers would get their loan payments permanently reduced or their loans forgiven. What’s more, the monthly payments consumers were required to pay weren’t applied toward their student loans. Instead, the payments were pocketed by the defendants. In addition, the lawsuit alleges that Equitable Acceptance locked consumers into high-interest loans to pay Manhattan Beach’s $1300 to $1400 fee without clearly disclosing fundamental terms, including the amount financed and the finance charge. The result: double-decker deception by Manhattan Beach and Equitable Acceptance.

The FTC and Minnesota AG’s complaint charges the Manhattan Beach Venture defendants with multiple violations of federal and state law, including violations of the Telemarketing Sales Rule’s ban on advance fees for debt relief services. The lawsuit also alleges Equitable Acceptance violated the TSR by providing substantial assistance to Manhattan Beach Venture when it knew (or consciously avoided knowing) that the company engaged in deceptive and abusive telemarketing. In addition, the complaint charges that Equitable Acceptance violated the Truth in Lending Act and state consumer protection provisions by – among other things – failing to clearly disclose important information about the financing.

But that’s not all. The FTC also filed suit against a company known as Student Advocates, another outfit that allegedly engaged in similar deceptive student loan debt relief practices – and also used Equitable Acceptance financing.

To settle the Manhattan Beach case, the company and its owners Christopher Lyell and Bradley Hansen have agreed to a lifetime ban from selling any kind of debt relief product or service and a $4.2 million judgment, all but $156,000 is suspended based on their inability to pay. They also must notify their customers that none of their prior payments have gone toward student loan repayment.

Based on its conduct with customers of both Manhattan Beach Venture and Student Advocates, Equitable Acceptance has agreed to a monetary judgment of almost $28 million, all but $1 million of which is suspended. The FTC’s case against Student Advocates and its owners is pending in federal court.

Other companies can take three points from the settlements with Manhattan Beach Venture and Equitable Acceptance.

Expansive student loan debt relief claims are likely to attract law enforcement attention. Legitimate federal loan forgiveness programs let people apply for free, but they have very strict eligibility requirements. For example, applicants for Teacher Loan Forgiveness must have taught for five years in a low-income school. Income-driven repayment programs, which last at least 20 years, require annual recalculation of the borrower’s monthly payments – a recalculation that marketers can’t quantify in advance. So if your company makes claims about student loan debt forgiveness or reduced monthly payments, expect federal and state scrutiny.

If you use telemarketing – in-bound or outbound – to promote debt relief services, it’s illegal to charge upfront fees. The Telemarketing Sales Rule doesn’t mince words. Charging consumers upfront fees for purported relief from any kind of debt, including student loans, is illegal. Period.

Liability under the FTC Act, the Telemarketing Sales Rule, and state consumer protection laws is expansive. Companies like Equitable Acceptance can’t bury their head in the sand in an effort to ignore what partners and affiliates are up to. The settlement should serve as a message to others in the financial sector that it’s a bad idea to try to make an illegal buck from people struggling to pay their student loans.

The FTC also has advice for consumers about student loans.


Why is it that these criminals are lightly slapped on the wrist; assessed a penalty that they say they can't pay and so the penalty is grossly reduced and they sail off into the sunset. WHY AREN'T THEY SENTENCED TO PRISON FOR A LONG, LONG, LONG TIME ???
The deterrent for these types of crimes is virtually nonexistent.


Exactly! I fell for this. Easy to do when you're a single mom, and trying to reduce debt. Now I'm out over 3000 dollars. I feel like an idiot, and I'll never get any of it back. It's b.s. they should have to pay it all back so it can actually go to my loans that keep building interest.

I would like all of my money back! So mad!

The FTC has a page of questions and answers for customers of Manhattan Beach Venture, Equitable Acceptance Corporation, and Student Advocates Team. Go to that page to read about what to do now, getting money back, student loan forgiveness and more.

Wow, i have been unemployed, temp work, etc..i been paying them since 8/25/2015. If i wasn't paying anything, i was trying to help my credit, because they said it would help financially in school loans and increase my credit if i was on time. I thought i was doing something right because i wanted a better score. It came, well it comes up on my report as good paying history. What happens to that? I committed myself because i thought i was making things better. Then i received constant calls because i was really short and needed the amount i was paying monthly. So anytime i did that, they took out twice the amount. Wow, been struggling while they so call succeeding on the other end. This is very sad, especially when one is doing their best to make their lives better. Thank you for the Awareness. I have every email from beginning to end. The last payment they took was just recently while im struggling keeping my roof & lifestyle up unemployed/employed, going through anxiety, for years...just to keep my word on some false flag. Robbing from people homes trying to make a good living. Robbing peoples light, food, necessities, etc. All that adds up. 8/25/2015 to 09/30/2019...i have every email, bank record taken out automatically, letters, possibly text, etc..

Wow, I struggled to pay that payment and they get a slap on the wrist. We need our funds back.

Uuuhh, plain and simple, where my money at? I have been paying FAITHFULLY for over 3 years, messed up my credit, so y'all can still pocket my hard earned money? Nope!!! Not this woman, I will fight back for EVERY penny!!!

I also struggled to pay them for fear that my credit would be affected... Will I see any money back from the lawsuit?

I have been paying EAC since 4/2516 till present! That’s 1,587 that adds up when you’re a single mom...that money didn’t have to be taken from me or a lot of other innocent people who were scammed by these companies. Will we be “refunded” the money we were “defrauded”?

The FTC has a page of questions and answers for customers of Manhattan Beach Venture, Equitable Acceptance Corporation, and Student Advocates Team. Go to that page to read about what to do now, getting money back, student loan forgiveness and more.

The FTC has a page of questions and answers for customers of Manhattan Beach Venture, Equitable Acceptance Corporation, and Student Advocates Team. Go to that page to read about what to do now, getting money back, student loan forgiveness and more.

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