On March 30, 2020, the Federal Trade Commission (FTC) announced that it had reached a settlement with three student loan debt relief companies and their owner, resolving allegations that the companies made false promises to consumers and charged illegal fees in violation of the Federal Trade Commission Act (FTCA), 15 U.S.C. § 45(a), and Telemarketing Sales Rule (TSR), 16 C.F.R. part 310.

According to the Complaint, filed in the U.S. District Court for the Central District of California, the companies allegedly guaranteed they could reduce consumers’ student loan repayment amounts or get them forgiven altogether through an income-driven repayment (IDR) plan.  For example, the companies allegedly made misrepresentations through text messages to consumers stating, “You have been pre-qualified for payment reduction/student loan forgiveness.”  In exchange for their debt relief services, the companies allegedly charged an illegal up-front fee of $699 and a monthly fee of $39.  In preparing consumers’ IDR applications, the companies also allegedly falsified consumers’ family size information and also paid consumers for positive reviews on the Better Business Bureau website without advising consumers to disclose the payment in their reviews.

The proposed Stipulated Order For Permanent Injunction and Monetary Judgment includes a $23.9 million judgment in equitable monetary relief, but the entirety of the judgment except for $470,000 in assets that the companies have will be suspended based on inability to pay.  The stipulation bars the companies from providing debt relief services in the future.