A federal consumer watchdog announced a resolution this week that will result in thousands of student loan borrowers receiving payments to compensate them for allegedly fraudulent debt relief practices. The announcement comes as consumer advocates are warning borrowers and administration officials of the dangers of false and misleading communications about student loan forgiveness and relief programs.
Here are the details.
Student Loan Debt Relief Settlement
The Consumer Financial Protection Bureau (CFPB), a federal agency tasked with overseeing the financial services industry, announced that 23,000 borrowers will receive compensation to resolve claims of predatory practices by student loan debt relief companies.
A CFPB lawsuit had alleged that between 2015 and 2017, five student loan debt-relief companies “violated the Consumer Financial Protection Act (CFPA) and the Telemarketing Sales Rule (TSR) by making deceptive representations about their services,” including misrepresenting “that [borrowers’ student loan] interest rates would be reduced, their credit scores would improve, and that the U.S. Department of Education would become their servicer,” according to a CFPB statement released on Monday. The debt relief companies are Docu Prep Center (doing business as Certified Document Center), Certified Doc Prep Services, Assure Direct Services, Direct Document Solutions, and Secure Preparation Services.
The CFPB also alleged that several debt relief companies violated federal law by illegally collecting advance fees for debt relief services or marketing debt-relief services to millions of consumers using credit report information that was illegally obtained.
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A court entered a default judgment against the companies last year. Under the terms of the CFPB’s resolution, eligible student loan borrowers will receive over $19 million in payments to compensate them. The payments will be processed by Epiq Systems, a contractor for the CFPB, and checks should start going out this week.
“If you have questions related to the case, you can call 1-877-899-2926 or email info@cfpb-monsterloans.org,” according to the CFPB statement.
How to Spot Student Loan Forgiveness and Debt Relief Scams
As millions of student loan borrowers contend with an ever-changing landscape of student loan forgiveness programs and other relief initiatives, the environment is ripe for scammers to take advantage of people, as consumer advocates warned officials last week.
According to the Education Department, borrowers should be wary of student loan communications from any company that contain the following:
- Language indicating that a borrower has been “flagged” for student loan forgiveness or has been pre-approved for relief.
- Pressure tactics pushing student loan borrowers to “act immediately” to benefit from student loan relief.
- Unreasonable up-front fees or monthly maintenance charges.
- Requests for a student loan borrower’s log-in credentials for their online student loan accounts.
The Education Department encourages borrowers to only work with their contracted student loan servicer. Borrowers can confirm who their current servicer is by checking their StudentAid.gov account.
Further Student Loan Reading
Court Approves $6 Billion In Student Loan Forgiveness For 200,000 Borrowers To Resolve Lawsuit
The Student Loan Pause Is Actually Leading To Loan Forgiveness — Are Further Extensions Coming?
Supreme Court Will Hear Two Major Student Loan Forgiveness Challenges In February 2023