Student loan debtors targeted by fraudsters
Those shackled with student loan debt are increasingly being targeted by scams and shady companies promising relief.
The National Consumer Law Center investigated the growth of these student loan-focused debt relief companies and came away with some serious concerns about how they do business.
"There were a shocking number of inaccuracies and lack of transparency among the companies in our investigation," said National Consumer Law Center attorney Deanne Loonin, who wrote a report about the issue that was released today.
Among the concerns raised in the report about these companies are that they:
- Claim certain debt relief programs are theirs when they are actually government programs
- Assess fees for services borrowers can get for free
- Don't disclose the fees they do charge
- Charge extremely high fees
- Provide misleading information that is often wrong
- Are only interested in selling services, not reducing borrowers' debt
Fees can be as much as $1,600 -- along with monthly payments of up to $50 -- to retain one of these companies. The investigation found that it is not clear if consumers are receiving any benefit for those payments or getting services that they couldn't have gotten for free on their own.
Two other areas of concern, the Consumer Law Center found, were that some of these companies were requiring their clients to give them power of attorney and to disclose their student loan PIN numbers.
"Given the many misrepresentations that NCLC uncovered, it is unlikely that these companies are providing quality services in return for the money they are charging," the group said. "Such practices severely compound the pain of vulnerable consumers seeking to find resolutions to difficult student debt problems."
The Consumer Law Center wants to see student loan relief programs offered by the government simplified and these companies now interceding to play by the same rules that apply to other debt relief firms. That includes disclosing fees, not charging in advance of providing the promised services, and not running deceptive advertising.
The NCLC runs the Student Loan Borrower Assistance Project to help inform those with student loan debt so that they can make better choices about how to handle their situations.
Borrowers can also look at federal resources available from the Department of Education and the Consumer Financial Protection Bureau to get additional information that could help avoid having to engage one of these questionable companies. Many services involving managing student loan debt are available for free to borrowers.
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