Refunds are on the way for thousands of borrowers duped out of their money in a student loan debt relief scheme, according to the Federal Trade Commission.
The agency plans to send 14,521 checks totaling over $822,000 to people tricked into paying for services offered by Student Advocates, which falsely promised to lower or completely wipe out student loan payments and debt, officials wrote in a news release.
It’s not clear when the checks will go out, but recipients are advised to cash them within 90 days.
The FTC sued Student Advocates and a third-party financier, Equitable Acceptance Corporation, in September 2019 and accused them of charging illegal upfront fees that they led borrowers to believe would go toward their student loan balance.
“None of the money collected by the defendants was paid toward consumers’ student loans,” the FTC said.
The 34-page complaint also alleges the companies made false promises and steered borrowers into predatory, high-interest loans in order to pay the upfront fees. The companies, along with at least five other defendants, targeted consumers saddled with student loan debt as part of a “nationwide debt relief telemarketing scam” dating back to November 2014, prosecutors wrote.
Student Advocates would call and tell borrowers they were eligible for a federal debt reduction program to have all or part of their student loans forgiven, according to the complaint. During the calls, the company also quoted borrowers a new, lower student loan payment that ultimately went toward a $1,300 to 1,400 fee.
Further, Student Advocates never told consumers who enrolled in a credit contract with Equitable Acceptance Corporation “that they would be paying interest on the EAC loan to pay the ... $1,300–1,400 fee or that the annual percentage rate of that loan was typically between 17% and 22%.”
The companies have since been banned from providing any debt relief services after reaching a settlement with the FTC.
Under the agreement, Student Advocates and EAC were also barred from collecting payments from borrowers who bought their services and were required to pay some of the money back.