It was just a matter of time before scammers turned their sights onto a new industry and some were wondering why these crooks took so long to invade the student loan debt industry.
After all, there’s not a single scammer that’s not always on the lookout for the next big weakness. In fact, these crimes are “surging”, says the National Consumer Law Center.
What They’re Doing (or Not)
These scammers share a few common denominators:
- They misrepresent themselves as companies that can provide complete resolutions for families looking to reduce their debt
- They often claim their services are backed by (or are products of) the Federal Government
- They’re misleading college students with promises of low or no fees
- They’re bypassing full disclosures of what their products are or what they do
- They’re insisting that they’re the only ones who can “fix” their student loan debt
Given the many misrepresentations uncovered, it is unlikely that these companies are providing quality services in return for the money they are charging,
reads a statement by the NCLC. Once you delve a bit further, it becomes clear that there’s a lot at stake for those who fall victim to these criminal operations.
Student Loan Debt Knowledge
What the crooks hope consumers don’t know are the changes recently made to the Income Based Repayment program. Qualifying is much easier these days and in fact, debtors can actually negotiate far better terms than any company working on its behalf. That’s because many of the companies, while they understand that changes were made to the law, it’s not their goal to guide consumers, but rather, collect their money.
A partial financial hardship is often all it takes to qualify for IBR. Lower payments and extended repayment periods are just two of the ways it can help those with college debt. It doesn’t apply to any credit card debt accrued during college, but it can free up money that can then be applied to the revolving debt.
Another effort made in order to provide a well rounded study included secret phone calls. What it found was that none of these companies could provide definitive answers to questions surrounding fee structures and program details. There were no fees mentioned on any of the websites that were brought live, either.
Where the Money Is
The fees were sometimes as high as $1,800 and many programs also required monthly payments in the form of fees that were electronically withdrawn from consumer accounts. Those monthly fees usually ranged between $20 and $50 and the study’s authors said,
The monthly fees are particularly suspect since it is unclear what services, if any, the consumer is buying on a monthly basis.
One company even said it was a partner with the Department of Education.
It could be that the government is an unwilling partner with these crooks. The federal programs designed for college students are incredibly confusing, have too much red tape and are often abandoned by the debtor who’s unable to make sense out of it. Because of this, many will instead take the path of least resistance, which, in this case, means a scammer who’ll do or say anything.
We understand that people sometimes pay for services that they can get for free,
said National Consumer Law Center attorney Deanne Loonin, the report’s author.
But the companies should be transparent.
Several laws, including the Federal Credit Repair Organizations Act and the FTC Telemarketing Sales Rule, are broken every day. The NCLC noted numerous potential legal violations of these consumer protection laws. There’s another disturbing fact that seems to be part of most of these shady operations. When fine print is made available, it’s often with arbitration clauses that the users must agree to. It basically locks the consumer out of any avenues for relief when they realize they’ve been victimized.
There could be a saving grace, but it’s a tough one and the laws vary from state to state. If the website misrepresents its services or the intent of the owners, the debtors could argue that as a way out of the agreement. In some instances, these scammers will use various loan relief programs that aren’t even in existence.
Tips on Handling These Criminals
So what should consumers do? There are a number of things that should be sending up red flags and if you spot any of them, of course, you want to back yourself out of it. You should never sign over your power of attorney as part of an arbitration clause or any other reason. If you’re asked for government PIN numbers, which are part of many student loans, that should be a huge problem and one you don’t need to fall for. If that happens, you’re asking for trouble like identity theft. Understand that many of these companies are under investigation, so there’s also a chance that you may not be able to find the company you’re currently dealing with if it’s one the government has found to be operating illegally.
By the same token, if you feel as though you’re being scammed, you’ll want to report that company to the FCC or Consumer Financial Protection Bureau (CFPB). Don’t forget due diligence. Check with the Better Business Bureau, enter the company’s name into a search engine; often, if there have been a lot of complaints, those will be the first returns on the results. It could provide insight as to how the company operates and problems other debtors might have in common. The above mentioned report concludes with a strong message:
One of the best ways to keep these companies in check is for the government to improve its administration of its own programs.
The Department of Education said it offers a wide range of free tools and resources available to borrowers at studentaid.gov.
Have you considered using one of these companies or have you already? What was your experience like? Share your stories with us in the comments section or join the conversation on Facebook.