On Sept. 20, 2018, New York Attorney General Barbara D.
nine student loan debt relief companies and two executives for allegedly using
deceptive practices to convince thousands of student loan borrowers to purchase
debt relief services already available for free from the U.S. Department of
Education or their student loan servicer.
The suit alleges multiple violations of law, including
falsely claiming to be affiliated with the federal government, making multiple
misrepresentations to induce consumers to enroll in their services and charging
consumers illegal upfront fees and/or higher interest rates than is permitted
by New York state law. New York’s civil usury limit is 16%, while one of the
accused companies charged as high as 20.99%.
The defendants typically charged each student $1,000 for
their services and accepted scheduled payments from borrowers who believed that
these payments were either going directly toward their loans or to a refinanced
loan. As a result, some borrowers stopped making payments on their actual loans,
ultimately owing more on their student loans due to the missed payments.