Security & Fraud

New York AG Sues Student Loan Servicing Companies

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New York’s attorney general Barbara Underwood on Thursday (September 20) sued ten companies and two executives for tricking student loan borrowers into purchasing student loan debt relief services they shouldn’t have paid for.

Reuters, citing Underwood, reported the defendants in the case charged $1,000 or more for the services after tricking the struggling borrowers with fake claims that the companies are affiliated with the government or that their help was actually necessary. According to Reuters, the defendants include Debt Resolve Inc, of Hawthorne, New York, chief executive Bruce Bellmare, and his predecessor Stanley Freimuth; Hutton Ventures LLC, a Santa Ana, California-based business partner of Debt Resolve; and Equitable Acceptance, a Minnetonka, Minnesota-based financing company. Underwood told Reuters that the companies went after struggling borrowers with “deceptive, fraudulent and illegal conduct” since 2014 and possibly longer. The nation currently owes $1.3 trillion in student loan debt, and one in five borrowers are behind in paying that back, Underwood told Reuters. She noted the defendants were targeting many of those borrowers.

“These companies sought to line their own pockets by taking advantage of students who were simply trying to pay for their education,” the New York AG said in a statement. The companies are accused of violating state credit repair and telemarketing rules, noting the 20.99 percent interest rate on most of Equitable’s loans were higher than the 16 percent civil usury limit in New York, reported Reuters. Underwood’s lawsuit also pointed to deceptive marketing practice, with Underwood pointing to a Facebook ad that hyped so-called breaking news that the government in the U.S. has approved a graduate repayment plan even though the program has been available for ten years. The AG is seeking civil fines, restitution and a permanent injunction against the accused.
“It strikes me that the lawsuit has merit,” Mark Kantrowitz, publisher of Savingforcollege.com, said in an interview with Reuters. “There are companies that can take advantage of borrowers’ lack of awareness of what they can do.”

 

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