On November 19, 2020, the Federal Trade Commission (FTC) announced that it had reached a settlement with three California-based student loan debt relief companies and their founder after they allegedly misled consumers by falsely promising that their monthly payments would go toward lowering their student loan debt.
The complaint, filed in the U.S. District Court for the Northern District of California, alleged that the companies violated the FTC Act and the Telemarketing Sales Rules by sending communications to consumers, including personalized mailers and recorded telephone messages, that falsely claimed that they were eligible for federal programs that would permanently reduce their monthly loan payments or forgive their student loan debt. The FTC alleges that the companies would collect up to $800 in up-front fees in order to enroll consumers in federal loan assistance programs–in addition to other fees, including ongoing monthly membership fees. The companies also allegedly misled consumers into believing that their monthly payments would be applied to their overall student loan payments when they actually were not.
Under the settlement, the companies are permanently restrained and enjoined from providing debt relief services and from engaging in unlawful telemarketing practices. Furthermore, the companies agreed to a $62 million monetary judgment, though all but approximately $9.3 million of that amount has been suspended.