Businesses promising student loan relief cheated consumers out of millions, FTC says

A federal judge granted the Federal Trade Commission a temporary restraining order against an operation bilking consumers out of millions of dollars by pretending to be affiliated with the U.S. Department of Education and falsely promising student loan debt relief, the agency announced Tuesday.

U.S. District Judge James V. Selna granted the restraining order after the trade commission filed its complaint against Arete Financial Group and several related companies last week, according to an agency spokeswoman. The order was unsealed late Friday but had not been electronically uploaded as of Tuesday, the spokeswoman said.

In the complaint, the trade commission alleges Arete and the other companies released radio, television and online ads falsely claiming they were part of a U.S. Department of Education "income-driven program," designed to help borrowers reduce their monthly federal loan payment or have portions of their loan forgiven.

The companies then charged borrowers upfront fees ranging from $500 to $1,800 to enroll in student assistance programs, the complaint alleges. Rather than assist customers in getting their loans reduced or forgiven, the companies merely called the original loan servicer to have the client's loan put in temporary forbearance, according to the complaint.

Though borrowers were initially relieved of paying loans while in forbearance, interest continued to accrue, adding to the principal balance and leaving customers owing more than before, the complaint alleges. Federal Trade Commission v. American Financial Support Services, Inc., 19-CV-02109 (C.D. Cal., filed Nov. 4, 2019).

-- Glenn Jeffers