Federal Action Against Student Loan Relief Scamsv

Thousands of student loan borrowers are receiving refunds totaling over $4.1 million following allegations of fraudulent practices by debt relief companies, the Federal Trade Commission (FTC) announced.

The Scam

The FTC identified South Dakota corporations Mission Hills Federal and Federal Direct Group for deceiving consumers with false promises of loan forgiveness. These companies allegedly convinced borrowers to halt payments to their federal loan servicers and instead make payments to them, in exchange for reduced monthly payments. However, borrowers seldom experienced decreased payments while being charged exorbitant fees by the companies.

Legal Action

In response to a 2019 complaint, the US District Court for the Central District of California ruled in favor of the FTC, prohibiting the companies from telemarketing and providing debt relief services. The court decision paved the way for refunds to affected borrowers.

Refunds and Assistance

The 27,584 impacted borrowers are set to receive refunds by mail and are advised to cash the checks within 90 days. For inquiries regarding refunds, borrowers can contact JND Legal Administration, the entity overseeing the FTC’s refund process.

Government Crackdown

The FTC and the Consumer Financial Protection Bureau (CFPB) have intensified efforts to combat fraudulent debt relief schemes. Recently, the CFPB announced $10.9 million in refunds to over 8,000 borrowers after exposing a California-based company for charging illegal upfront fees.

Awareness and Reporting

As federal student loan payments resumed in October, borrowers are urged to remain vigilant against scams. The Biden administration cautioned borrowers, emphasizing that federal repayment assistance is provided free of charge by the Education Department. Borrowers can report fraudulent activities to the CFPB or the FTC’s dedicated reporting platform.

The FTC’s actions underscore the commitment to protect borrowers from predatory practices and ensure equitable access to legitimate student loan relief programs.