Crackdown on Student Loan Debt Relief Companies

Many student borrowers in Oak Park and throughout the country are struggling with debt and trying to determine whether consumer bankruptcy might allow them to get a fresh start. As many people know, it can be extremely difficult to discharge student loan debt through personal bankruptcy, and as such, not many debtors often try to do so. Given the difficulty of discharging student loans in bankruptcy and the rising level of student debt in the country, many borrowers have been contacted by student loan debt relief companies. However, as a recent article in Consumer Affairs underscores, some student loan debt relief companies are engaging in fraudulent consumer practices.
The Federal Trade Commission (FTC), along with state attorneys from eleven different states, has “launch[ed] a coordinated attack on student loan debt relief services, alleging they have fraudulently collected roughly $95 million in fees, according to the article. Illinois Attorney General Lisa Madigan is among those partnering with the FTC to end student loan debt relief scams.
Why are Student Loan Debt Scams Successful?
Maureen K. Ohlhausen, the FTC Acting Chairman, indicated that the FTC is working with state partners to provide better information to consumers, from helping consumers to understand some of the signs of a scam to knowing where to report a student loan debt relief scam. Why do so many consumers end up paying for fraudulent student loan debt relief services? In part, so many borrowers are struggling that they often are vulnerable to scams. But there may be more at work.
According to the article, Illinois Attorney General Lisa Madigan believes that “student loan debt relief scams are successful because borrowers are not receiving the information they need to repay their loans.” This lack of information only leads to additional financial difficulty for many consumers, since student loan debt relief companies “rob borrowers of the money they could be using to pay down their student loan debt.” In other words, if borrowers had clearer information about how to repay their loans and what types of income-based options might be available to them, those borrowers may be less likely to become victims of student loan debt relief scams.
Signs of a Student Loan Debt Relief Scam
Are there signs that you may be dealing with a student loan debt relief scam? According to the article, the following may be indications that the company contacting you is scamming you out of money you could be using to pay down your student loan debt balance:
  • Company name that sounds similar to a government agency;
  • High-pressure sales tactics;
  • Upfront fees (sometimes totaling $700) to sign up for the service; and
  • Service or benefit the company provides is actually free through the Department of Education or the Consumer Financial Protection Bureau (CFPB).
There are some legitimate ways to have student loan debt forgiven, and some employers assist their employees with repaying student loan debt. At the same time, many consumers who are struggling financially have been targeted by student loan debt relief scams that make such promises but cannot keep them.
Seek Advice from an Oak Park Consumer Protection Lawyer
If you have been targeted by a debt relief scam, or if you have questions about managing debt and bankruptcy, an experienced consumer protection attorney in Oak Park can speak with you today about your situation. Contact the Emerson Law Firm to learn more about how we can assist you.
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