July 19, 2014
Illinois sues student-loan "debt relief" companies
Illinois Attorney General Lisa Madigan has staked out a new area of consumer protection with a pair of lawsuits against two supposed debt-relief companies that claim they can reduce or eliminate outstanding student loans.
Madigan filed the suits against First American Tax Defense LLC, based in Chicago, and Broadsword Student Advantage LLC, based in Frisco, Texas, alleging the unlicensed companies engaged in deceptive marketing practices and illegally charged consumers hundreds of dollars in upfront fees to reduce or eliminate their student loan debt burden.
In reality, Madigan alleges, the companies sought to scam vulnerable people into paying as much as $1,200 upfront for bogus services, including assistance enrolling in a fake “Obama forgiveness program,” or for government services that are already free of charge.
“These companies illegally charge fees for services that student loan borrowers can obtain themselves through government programs at no cost,” Madigan said. “My office will be aggressive in cracking down on scam operations that prey on student loan borrowers for profit.”
PhotoStudent loan debt levels have grown to historic proportions, now affecting nearly 40 million Americans who have $1.2 trillion in outstanding debt. Madigan’s lawsuits allege that First American and Broadsword Student Advantage are doing an end-run around an Illinois law that she wrote to ban companies from charging people upfront fees for so-called debt settlement services.
Madigan’s lawsuits allege First American and Broadsword Student Advantage have advertised heavily on the radio in Chicago and downstate, offering consumers a myriad of options to ease their debt burden based on the companies’ alleged expertise and false affiliation with the U.S. Department of Education to consolidate or forgive their loans.
The companies are alleged to offer to cut student loan payments in half or eliminate them entirely, and specifically offer public service employees a loan debt forgiveness program for which the companies could not qualify them. The lawsuit against First American specifically advertises an “Obama forgiveness program” that is not an actual government program.
In announcing the lawsuits, Madigan urged current and former students never to pay upfront for help with student loan debt relief. For information on legitimate sources of free assistance, consumers can contact the Consumer Financial Protection Bureau.
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