Some of you may have been unfortunate enough to come into contact with the newly arisen student loan “debt relief” industry. It’s no surprise that this industry has come into existence just recently. I have received an influx of phone calls in the past few months from consumers that are being crushed by hundreds of thousands of dollars’ worth of student loan debt. These consumers are in dire need of assistance, but not the kind that this newly emerging student loan “debt relief” industry claims to provide. There’s been a new report issued by National Consumer Law Center (NCLC) that reveals serious problems with this industry as well potential violations of federal and state laws which are designed to protect consumers from this sort of thing.
Deanne Loonin, National Consumer Law Center attorney and expert on student loan issues stated that, “[T]here were a shocking number of inaccuracies and lack of transparency among the companies in our investigation.” Some of the study’s key findings are that the student loan “debt relief” industry mischaracterizes Federal government programs as their own; the companies are charging exorbitant fees for services that are available to consumers for free; most companies do not disclose fees; the fees that these companies provide are extraordinarily high and the companies discourage consumers from handling their own cases.
Three of the most disturbing findings revealed by NCLC’s report are that, 1) these companies are using mandatory arbitration clauses. Arbitration clauses require consumers to waive their right to use the court system and instead, force consumers into binding arbitration with the lender; 2) the so-called, “debt relief” companies are requiring consumers to sign Powers of Attorney. By signing Powers of Attorney, consumers are unknowingly giving these questionable companies a breadth of power to abuse, and 3) the companies focused on in NCLC’s investigation required consumers to reveal their federal student loan PIN number in order to move forward with the service!
The underhanded practices employed by the “debt relief” companies are not only wholly ineffective in reducing student loan debt, but they raises serious privacy concerns for consumers. Given NCLC’s findings, it is abundantly clear that these companies are providing absolutely nothing of value to consumers in return for the exorbitant fees they are charging. These practices despicable and these companies prey on those who are struggling and susceptible fraud and trickery. There are viable resolutions to difficult student debt problems, but none of them involve utilizing the services of these so-called debt relief companies. If you are a consumer who has become involved with one of these companies, cut your ties now. If you’ve been lucky enough to escape their clutches, continue to do so and contact a reputable consumer attorney instead. Good luck!
By: Jennifer Addonizio Rozen, Partner at Fishman & Mallon LLP
Email Jennifer at firstname.lastname@example.org