The FTC and Student Loan Debt Relief Scams

Transcription

1 The FTC and Student Loan Debt Relief Scams NCHER Conference February 5, 2018 Adam Wesolowski, Attorney Bureau of Consumer Protection, Division of Financial Practices

2 Disclaimer The views expressed in this presentation do not necessarily reflect the views of the Commission or any individual Commissioner. 2

3 Overview Introduction to the FTC Review of FTC laws applicable to Student Loan Debt Relief Recent FTC Student Loan Debt Law Enforcement Actions ( Game of Loans law enforcement sweep) and highlighted unlawful practices Consumer Education Resources and Complaints/Referrals 3

4 The Protect consumers; promote competition. Regulatory/policy work. Law enforcement, with partner collaboration. 4

5 FTC Laws Typically Applicable to Student Loan Debt Relief Section 5 of the FTC Act The Telemarketing Sales Rule (TSR) Additional rules/statutes if offering other types of services such as mortgage assistance relief (MARS Rule) and credit repair (CROA) 5

6 Section 5 of the FTC Act, 15 U.S.C. 45(a) unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful. Deception: A material representation or omission that is Likely to mislead consumers acting reasonably under the circumstances Unfairness: Causes or is likely to cause substantial injury; That consumers could not reasonably avoid; and The injury is not outweighed by countervailing benefits to consumers or competition 6

7 The TSR, more than just the Do Not Call List! 7

8 The TSR, 16 C.F.R. Part 310 What does it cover? Telemarketing and for debt relief services, both inbound and outbound calls Debt relief services negotiation or alteration of existing, unsecured debts Telemarketers and companies that provide substantial assistance to main entities knowing or consciously avoiding knowing of their conduct What are the restrictions? No advance fees Prohibition on false or unsubstantiated material claims Required pre sale disclosures 8

9 Student Loan Debt Relief 9

10 Recent Student Loan Debt Relief Enforcement Sweep 10

11 FTC Federal Court Actions Strategic Student Solutions LLC Student Aid Center Student Debt Doctor LLC American Student Loan Consolidators in Florida Alliance Document Preparation (EZ Docs Preps) M&T Financial Group (Student Debt Relief Group) A1 DocPrep Inc. 11

12 Unlawful Practices From Sweep Pretending to be affiliated with the government or calling from consumers loan servicers; Example from FTC v. M & T Financial Group that they: work on behalf of the government, are a partner of ED, or represent ED in assisting students. Complaint also alleges Defendants use addresses that end in ".us." 12

13 Unlawful Practices From Sweep Misrepresenting loan repayment or forgiveness options; Example from FTC v. Student Debt Doctor: "our clients may typically receive $0 a month payments with a complete loan forgiveness at the end of the programs. This is what is typical with most federal student loans." 13

14 Unlawful Practices From Sweep Claiming people have to pay a fee to get debt relief help from the government; Example from FTC v. Alliance Document Prep complaint: Defendants also falsely tell consumers that they must pay to receive reduced monthly payments, reduced or eliminated interest, loan forgiveness, or discharge. 14

15 Unlawful Practices From Sweep Misrepresentations about the application of payments: Both the American Student Loan Consolidators and the M & T cases include counts where we allege that defendants misrepresented that some or all of consumers' monthly payments to Defendants would be applied toward consumers' student loans. 15

16 Unlawful Practices From Sweep Collecting illegal advance fees: All seven of the FTC sweep cases include a TSR advance fee violation count. Some companies collect a processing fee of $900 $1500 at the outset (FTC v. A1 DocPrep); Some companies collect an upfront fee as well as a monthly fee (FTC v. Strategic Student Solutions). 16

17 Consumer Education Resources 17

18 Background Student loan debt affects more than 42 million Americans $1.4 trillion in outstanding student loan balances Second largest segment of U.S. debt (after mortgages) 18

19 How to Avoid Student Loan Scams 19

20 Student Loan Consumer Resources FTC.gov/StudentLoans & Consumer.ftc.gov 20

21 Student Loan Consumer Resources Consumer.gov 21

22 Free Resources Available for free, in bulk, in English & Spanish, at 22

23 Stay Connected! FTC.gov/Subscribe 23

24 Complaints/Referrals The FTC encourages the reporting potentially unlawful conduct. You can submit a complaint online or over the phone. Consumer Sentinel Network database of consumer complaints. 24

25 Doc Prep & Debt Relief Companies & The Harm To Student Loan Borrowers Presented by: MOHELA February 5, 2018

26 Doc Prep and Debt Relief Companies Two Primary Types of Players, on the Front-End Document Preparation Companies & Student Loan Debt Relief Companies Both will Charge Borrowers Fees To: Apply for Consolidation Income-Driven Repayment Plans Forbearance Borrower Defense Closed School Discharge *(Will generally abbreviate each Doc Prep/Third-Party Debt Relief Company, as TPDR) 2 2/2/ MOHELA

27 Doc Prep and Debt Relief Companies Document Preparation Companies These entities hold themselves out as simply preparing the documents for the borrower, and charging a fee for that service, i.e. Consolidation, Income-Driven Repayment Plan Application, etc. Debt Relief Companies These entities market the ability to renegotiate, or settle a student loan debt, and/or offer some sort of credit assistance service. Among the other types of entities involved: - Payment Processors Collect monthly installment payments - Contract/Debt Buyers Buy Doc Prep/Debt Relief Co. contracts/receivables 3 2/2/ MOHELA

28 How TPDR s Harm the Borrower 4 2/2/ MOHELA

29 How TPDR s Harm the Borrower TPDR s Employ Various Tactics, to Lure Borrowers TPDR s May Misrepresent Who They Are/What They Do: Use a name, logo, or web domain similar to that of a legitimate organization Use similar toll-free phone telephone number to that of a student loan servicer(s) Imply a connection to the U.S. Department of Education Crafting non-existent and/or misleading programs, i.e. William D. Ford Act of 2012 Claim time limited to enroll in a certain repayment plan or forgiveness program Misquote borrowers estimated payment on new repayment plan 5 2/2/ MOHELA

30 How TPDR s Harm the Borrower TPDR s and Written Agreements for Services TPDR s attempt to bind borrowers with written agreements which include various fees: Large upfront fee for a set amount (Often Consolidation) Enrollment or subscription fees, and monthly maintenance fees These written agreements are often executed through the DocuSign Process Written agreements often contain Power of Attorney ( POA ) POA s rarely executed properly, i.e. notary, witnesses POA s often not provided to servicer Written agreements often involve borrower providing TPDR s personal identifying and login information 6 2/2/ MOHELA

31 How TPDR s Harm the Borrower How TPDR s Use this Personal and Login Information Impersonate borrowers via telephone or through the web: Consolidate the federal student loans of borrowers, causing many to lose qualifying payments, restarting forgiveness counter Change contact information of borrowers, i.e. telephone number(s), mailing address, etc. Remove borrowers from auto-debit program, enroll in paperless, etc. E-Sign Applications on the web account, i.e. IDR Repayment Plan, Forbearance Falsification of borrower information, particularly on IDR Plan Applications, i.e. Family Size, AGI, Access to Spouse s Income, etc., resulting in lower payment amount 7 2/2/ MOHELA

32 What MOHELA is Doing to Help 8 2/2/ MOHELA

33 What MOHELA is Doing to Help Identifying Affected Borrowers Log and track all complaints of borrowers who indicate they were contacted by a TPDR; we have 1,000 s of borrower complaints Review borrowers accounts for any suspicious activity, i.e. calls/documents If any suspicious activity detected, MOHELA will reach back out to the borrower Compiling all information relevant to TPDR s, provided by borrowers, into a TPDR s Tracking List MOHELA is querying its database to identify affected borrowers: Look for similarities in mailing address, address, and phone numbers; and, Look for information linked to TPDR s, or linking TPDR s together 9 2/2/ MOHELA

34 File a Complaint Against the Company If Borrowers Feel Misled, Report the Company to the Following: Your federal student loan servicer - can find at My Federal Student Aid. CFPB (Consumer Financial Protection Bureau) Your state s Office of Consumer Affairs or Consumer Protection Attorney General Federal Student Aid Feedback System Office of Inspector General Better Business Bureau /2/ MOHELA

35 NCHER Scam Infographic 11 2/2/ MOHELA

36 How to Spot a Scam Red Flags MOHELA purchased the URL: Purpose to advise borrowers of the warnings signs of TPDR s, including: Asked for initial and monthly maintenance fees to sign up for services Asked to provide your User ID and password Asked for credit card or debit card information Urged to act quickly because loan forgiveness programs are ending Urged to act or forfeit rights to your student loan benefits Told you that your student loan servicer will not help you 12 2/2/ MOHELA

37 Questions? MOHELA 633 Spirit Drive Chesterfield MO For more information, please contact: Mike Abernathy - Federal Contracting Services Senior Manager ext MikeA@MOHELA.com Scott Lause, Assistant General Counsel ext.3730 ScottLa@MOHELA.com 13 2/2/ MOHELA