PYMNTS MonitorEdge May 2024

FTC Refunds $4.1 Million to Student Loan Scam Victims

Federal Trade Commission

The FTC is sending millions in refunds to victims of a student fraud scheme.

The $4.1 million payments will go to some 27,000 consumers who were duped by a fake loan forgiveness scam, the Federal Trade Commission (FTC) said in a Wednesday (March 13) news release.

“The scheme used many names including Mission Hills Federal, Federal Direct Group, National Secure Processing, and The Student Loan Group,” per the release.

The commission said it filed a complaint against the operators in 2019, “alleging that since 2014 they tricked students into paying hundreds to thousands of dollars in illegal upfront fees and pretended to lower consumers’ monthly student loan payments.”

In addition, the operators tricked consumers into sending monthly student loan payments directly to them by falsely claiming to take over the servicing of the consumers’ loans.

“In reality, few payments were actually applied to consumers’ student loans and in many cases, none at all. Instead, the defendants kept consumers’ money for themselves,” the FTC said.

The news comes one month after the FTC announced that American consumers had lost a record $10 billion to fraud in 2023, with scammers employing digital tools to make it easier for them to discover new targets.

That total is 14% higher than the number of fraud losses reported during the prior year, the commission, said, with 2.6 million consumers reporting they were victims of fraud.

“Digital tools are making it easier than ever to target hardworking Americans, and we see the effects of that in the data we’re releasing today,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, said in a news release. “The FTC is working hard to take action against those scams.”

According to the FTC, the form of fraud that made up the largest of the losses last year was investment scams, with consumers reporting losing $4.6 billion to investment scams during 2023, an amount 21% higher than that reported in 2022.

At the same time, the financial world is also employing digital tools to protect themselves and their customers against fraud.

For example, 70% of financial institutions say they are using both artificial intelligence (AI) and machine learning (ML) to combat fraud, according to “Financial Institutions Revamping Technologies to Fight Financial Crimes,” a report done in collaboration between PYMNTS Intelligence and Hawk:AI.