Recent Consent Order Issued by the DFPI Against Student Loan Relief Company
On February 28, 2023, the California Department of Financial Protection and Innovation (DFPI) announced that it has entered into a Consent Order with an unlicensed student debt relief company based in Orange County and its owner. This action is apparently part of the DFPI’s continuing effort to crack down on student loan debt relief companies that violate the California Consumer Financial Protection Law (CCFPL) and the Student Loan Servicing Act (SLSA).
This Orange County-based company is accused of misleading student borrowers by giving them the false impression that it was affiliated with an official government agency during unsolicited telephone calls. From 2018 to the present, at least 790 California consumers have enrolled in EDU’s Debt Relief Services, and the company has collected at least $713,000 from California consumers through up-front servicing fees ranging from $116 to $2,449.
The DFPI has ordered the company and its owner to desist and refrain from engaging in unlicensed student loan debt relief servicing business, in violation of the SLSA, and to desist and refrain from engaging in unlawful, deceptive, and abusive student loan debt relief practices under the CCFPL and the federal Telemarketing Sales Rule (TSR). The owner individually has also been ordered to desist and refrain from owning, managing, operating, or controlling any entity that services student loans, or which offers or provides any consumer financial products or services as defined by the CCFPL, unless and until he or the entity has the applicable approvals from the DFPI and is in compliance with the SLSA, CCFPL, TSR, and the Federal Trade Commission Act.
As part of the DFPI’s order, the company and its owner are also required to rescind all debt relief, debt management, or debt consulting service agreements, and provide refunds to California consumers. The DFPI’s crackdown on student loan debt relief companies has included settlements with three other companies in this space.
DFPI Commissioner Clothilde Hewlett commented that these debt relief companies are taking advantage of California consumers with student loans, and that while the Biden debt relief plan is uncertain, Californians can be assured that the DFPI has their backs and will continue to enforce laws against companies that violate them.
Recent DFPI Warning Announced on Website Against Student Debt Relief Scams
The DFPI is further stepping up its efforts against student debt relief scams. The DFPI recently published a webpage solely dedicated to warning consumers about potential scams in this area. According to the webpage published by the DFPI on February 28, 2023, student loan debt relief companies often contact American borrowers through mail, email, or phone. These companies claim to offer assistance in managing or reducing student loan repayments for a fee. However, many of these companies are charging fees for services that are either free or that borrowers can complete on their own.
The DFPI warns that these student debt relief companies claim that they can negotiate with lenders, review loan files, and submit an application on behalf of borrowers for student loan forgiveness. They may even have accurate information about borrowers or their loan balances, giving the impression that they are legitimate.
Here are some important things to keep in mind according to the DFPI’s webpage:
• Federal student loan servicers cannot charge you to apply for loan forgiveness, income-driven repayment plans, deferment, forbearance, or to file any other paperwork.
• Federal student loan servicers do not charge any application or processing fees to consolidate your federal loans or to switch payment plans.
• You should never have to pay for information on how to repay your student loans. Federal student loan borrowers can access free assistance through the U.S. Department of Education (studentaid.ed.gov or 877-557-2575) or their federal loan servicer—the company to which they make payments.
• Only the U.S. Department of Education can consolidate, forgive, or lower the amount you pay on federal student loans.
• Consolidating federal student loans into a private loan will make you ineligible for federal income-driven repayment plans and some federal loan forgiveness options, including the Public Service Loan Forgiveness program (PSLF).
• You have the right to file a complaint. If a company violates any of your rights, you may file a complaint with the DFPI, the California Attorney General’s Office, the Consumer Financial Protection Bureau, or the Federal Trade Commission.
The webpage also urges consumers to identify student loan debt relief scams, and, to that end, provides consumers with a list of tips.