Companies Contacted Borrowers through Direct Mail, Facebook Ads, and Telemarketing – Falsely Claiming to be Affiliated with Federal Government; Making Multiple Misrepresentations to Get Consumers to Enroll; and Charging Illegal Fees and Usurious Interest Rates
Defendants Typically Charged Consumers Over $1,000 Each for Services Borrowers Can Get for Free
Attorney General Barbara D. Underwood announced a lawsuit against nine student loan debt relief companies, their financing company, and two individuals with leadership roles in several of the companies. The lawsuit, filed in New York Supreme Court, alleges that the defendants fraudulently, deceptively, and illegally advertise, market, offer for sale, sell, and finance student debt relief services to thousands of consumers nationwide, including thousands of New Yorkers.
The complaint alleges multiple law violations, including that defendants falsely claim to be affiliated with the federal government, make multiple misrepresentations to induce consumers to enroll in their services, and charge consumers illegal upfront fees and/or usurious interest rates. Defendants typically charge a consumer more than $1,000 for their services, which are available for free through the federal government or the consumer’s student loan servicer.
“New Yorkers are already struggling under a mountain of student loan debt,” said Attorney General Underwood. “These companies sought to line their own pockets by taking advantage of students who were simply trying to pay for their education. My office will continue to do everything in our power to protect students – and all New Yorkers – from predatory scammers.”
New Yorkers’ student loan debt is estimated at $86.54 billion, according to a 2017 Consumer Financial Protection Bureau report. The U.S. Department of Education estimates that 92% of all outstanding student loans are federal student loans.
The student loan debt relief companies named in the lawsuit are Debt Resolve, Inc.; Hutton Ventures, LLC; Progress Advocates, LLC; Progress Advocates Group, LLC; Student Advocates, LLC; Student Advocates Group, LLC; Student Advocates Team, LLC; Student Loan Care, LLC; and Student Loan Support LLC (collectively, “student loan relief defendants”). Debt Resolve, Inc., a New York company, is the majority owner of two of the other student loan debt relief entities. The two named individuals are Bruce Bellmare and Stanley E. Freimuth, the current and past CEOs of Debt Resolve, Inc. The financing company named in the lawsuit is Equitable Acceptance Corporation.
The lawsuit alleges that the student loan debt relief defendants contact borrowers in a number of ways, including through deceptive personalized direct mail solicitations that appear to come from the federal government and deceptive Facebook ads that claim as “breaking news” that certain United States Department of Education (“DOE”) programs were recently approved by the federal government, when in fact they were passed years ago.
The lawsuit further alleges that these defendants then rely on “Student Loan Advisors” to sell student loan debt-relief agreements to consumers by phone. Despite holding themselves out as being knowledgeable about student loans, these so-called Student Loan Advisors are in reality telemarketers with no specialized experience or expertise, who sell virtually identical student loan debt-relief agreements to borrowers using the same sales scripts and pitches. Student Loan Advisors repeatedly make false and deceptive misrepresentations to consumers such as:
- telling borrowers that they are from the federal government, are a part of the federal student loan program, are working with the federal student loan program, or are working with a federal student loan servicer – when in fact, they are not affiliated with the federal government or student loan servicers;
- telling borrowers that they cannot enroll in the debt-relief services offered on their own – when in fact, borrowers can work directly with their servicers or use the DOE website to obtain student loan debt-relief services at no additional cost; and
- telling borrowers that they can eliminate their student loan debt by making a number of payments to one of the defendants – when in fact, making these payments will not reduce, let alone eliminate, their student loan debt.
As detailed in the suit, some consumers stop making payments on their loans because they are led to believe that their payments to defendants are paying their student loans. These consumers ultimately owe more on their student loans due to the missed payments.
Defendants typically charge consumers more than $1,000 each for their services. In recent years, defendants have required that consumers enter into financing agreements with defendant Equitable Acceptance Corporation. The lawsuit alleges that these financing agreements typically charge New York consumers 20.99% interest, above the New York civil usury rate cap of 16%. The lawsuit also alleges that defendants violate federal and New York State laws designed to protect consumers from fraudulent credit repair organizations, telemarketers, and consumer credit agreements.
The lawsuit seeks injunctive relief, a declaration that defendants’ contracts with borrowers are null and void, restitution, damages, disgorgement, penalties, and costs.
The New York Legal Assistance Group (“NYLAG”), along with the law firm of Quinn Emanuel Urquhart & Sullivan LLC, also recently filed a class action against Equitable Acceptance Corporation and several other companies, alleging that they sell scam debt relief services to tens of thousands of federal student loan borrowers.
“The victims of Equitable Acceptance Corporation and its business partners are among the millions of vulnerable student loan borrowers already struggling to make ends meet,” said Danielle Tarantolo, Co-Director of NYLAG’s Special Litigation Unit. “We commend the New York Attorney General for seeking to stop these companies’ fraud and return their ill-gotten gains to borrowers.”
DOE offers a number of programs to help borrowers who are having difficulty paying back their federal student loans. DOE offers these programs to borrowers free of charge, including loan deferment and forbearance, income-based repayment programs, and loan forgiveness programs. Borrowers can learn about and, where necessary, fill out an application to enroll in these options, at no cost, by contacting their federal loan servicer or by going to DOE’s student loan website. Helpful information about student loans is also available on the New York Attorney General’s website.
Student loan borrowers who believe they have been defrauded are urged to file a complaint with the Attorney General online, or call (800) 771-7755 to have a complaint form sent via mail.
