IL AG Lisa Madigan, prominent student loan scam watchdog, speaking at an unrelated event.
According to a press release from the FTC, the authorities launched the operation ''Game of Loans'' against them, a play on the HBO's blockbuster ''Game of Thrones.'' The Federal Trade Commission along with 11 states and the District of Columbia started the first coordinated federal and state law enforcement proceedings against student debt relief scammers.
According to the FTC, the wrongdoers managed to collect more than $95 million in illicit fees by misleading borrowers. The Feds filed 36 suits against the companies accused of the illegal loan relief schemes. Plus, officials confirmed they were investigating more than 50 enterprises and added “winter is coming'' for all found guilty.
The companies in question charge American borrowers high and often illegal fees for fraudulent services such as loan forgiveness and payment reduction. In some cases, they even manage to convince certain student borrowers in need to provide the login details to their student loan accounts. After such a move, they would change the passwords and prevent the victims from keeping their payments current. As a result, the borrowers got their salaries garnished or their social benefits cut.
The ''Game of Loans'' crackdown took place in Illinois, Washington, Oregon, and Florida. There were also some fraudulent companies in North Dakota, Pennsylvania, Texas, Kansas, Maryland. Thirteen of the accused companies were based in Washington, confirmed the prosecutors.
In one example case by the U.S. District Court for the Central District of California, the defendants, the Los Angeles-headquartered A1 DocPrep, were accused of claiming to be from the U.S Department of Education while contacting clients with promises to cut monthly payments or even forgive loans. The company managed to illegally earn at least $6 million. The Feds accused it of fraudulent mortgage relief as well.
Another similar company, the American Student Loan Consolidator, based in Florida, pretended to be linked to the Education Department. Its victims paid it over $11 million for reduced interest rates, decreased monthly installments, and false promises of loan forgiveness.
According to the Illinois Attorney General, Lisa Madigan, the scams have been so successful because student borrowers do not receive adequate help from the servicing companies.
In an official statement, the Education Department highly recommends the borrowers to contact it first when they need to negotiate the terms of their student loans. It also confirms there were no upfront costs involved in any case. In addition to that, it cautioned that department officials will never promise a quick, easy loan forgiveness. Last but not least, borrowers should not share their username and password for their Federal Student Aid account with anyone.
image copyright © Daniel X. O'Neil