If you have student loans, you may be looking for any help you can get to pay them off. As bad as the situation is, you need to be careful of offers for help that call for money upfront or monthly fees. This is the modus operandi of companies that scam borrowers by promising debt relief that they cannot -- and will not -- deliver.
The Federal Trade Commission has taken a few of these companies on, and now the state of Illinois has joined the fray. The Attorney General's Office has filed lawsuits against two companies, one based in the state and the other in Texas, that engage in predatory practices with regard to student loan debt.
Illinois is the first state to take such an action. The lawsuit asks the court to shut the companies down and to order the companies to repay the borrowers and to pay applicable fines and penalties under the state's anti-fraud laws.
According to court documents, the companies connect with borrowers by advertising on television and radio. One of them offers to secure relief but does nothing the debtor could not do for himself. The company may promise to negotiate lower payments, to deal with wage garnishments, to improve credit scores and other similar services that someone drowning in debt would jump at.
In fact, the most this company does is to sign borrowers up for existing federal programs that are already available to all borrowers free of charge. The company cannot and does not follow through on the other promises. This company has also offered to sign borrowers up for a new federal program, the "Obama Forgiveness Program." Borrowers should know that there is no such program.
The other company takes a different approach, though it is just as much a scam as this one. We'll explain more in our next post.
The Daily Caller, "Illinois Suing Student Loan Settlement Companies," Blake Neff, July 15, 2014
Illinois v. First American Tax Defense LLC and Gustavo Montes et al., Complaint (Ill.-Cook Cty.), Case No. 14CH11483, filed July 14, 2014