2 companies scammed student-loan borrowers out of $8.8 million in ‘illegal’ fees over ‘phony promises of loan forgiveness and lower monthly payments,’ a federal watchdog says – DAVID RAUDALES

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2 companies scammed student-loan borrowers out of $8.8 million in ‘illegal’ fees over ‘phony promises of loan forgiveness and lower monthly payments,’ a federal watchdog says

The Federal Trade Commission building in Washington

Alex Brandon

The FTC accused two companies of scamming student-loan borrowers out of $8.8 million.
The FTC said they pocketed “illegal” fees for debt relief services that are normally free.
The companies’ operations are temporarily halted pending a final court decision.

A federal watchdog just cracked down on companies it accused of scamming student-loan borrowers out of millions of dollars.

On Monday, the Federal Trade Commission announced a federal court temporarily stopped operations of two companies — Express Enrollment LLC and Intercontinental Solutions LLC — over FTC accusations they pretended to be affiliated with President Joe Biden’s Education Department and deceived borrowers into paying them for “debt relief services that did not exist,” according to the complaint.

Specifically, the agency accused the companies of collecting about $8.8 million in “illegal advance fees” by offering services to borrowers that included the promise to lower or eliminate their student loan payments. The FTC also said the companies convinced borrowers to pay for services the Education Department always offers for free, like assistance on repayment and debt relief programs, and used those deceptive claims to obtain borrowers’ bank account and debit and credit card information, in possible violation of the Telemarketing Sales Rule.

“During a period of uncertainty for borrowers saddled with student loan debt, these defendants bilked consumers out of millions of dollars with junk fees and phony promises of loan forgiveness and lower monthly payments,” Samuel Levine, Director of FTC’s Bureau of Consumer Protection, said in a statement. “We are pleased that the court shut down this operation and froze its assets, and we will continue the agency’s ongoing efforts to pursue scammers that target the tens of millions of Americans with student loan debt.”

According to the complaint, one borrower said that “because I received a Pell Grant, my student loans would be forgiven up to $20,000, if I paid a processing fee of $375.” A federal court halted the operations of the companies last week, and it will determine whether they violated the law.

The companies could not immediately be reached for comment.

Biden’s administration has previously warned borrowers to keep an eye out for scams, especially with confusion surrounding the debt relief conversation. Nearly a year ago, the Education Department announced up to $20,000 in debt relief for federal borrowers. While the Supreme Court struck down the plan at the end of June, student-loan payments are still resuming in October after an over three-year pause, and scammers have been trying to take advantage of the changing landscape.

In June, for example, the FTC accused a separate group of scamming borrowers out of $3.3 million over charging fees for debt relief services that are normally free, and it send payments to 37,800 impacted borrowers. 

Read the original article on Business Insider