Refunds are on the way for thousands of borrowers tricked out of their money under a student debt relief program, according to the Federal Trade Commission.
Agency plans to send 14,521 checks totaling more than $822,000 to people tricked into paying for services offered by Student Advocates, who falsely promised to reduce or completely eliminate loan repayments and student debt , officials wrote in a press release.
It is unclear when the checks will be sent, but recipients are advised to cash them within 90 days.
The FTC sued Student Advocates and a third-party financier, Equitable Acceptance Corporation, in September 2019 and accused them of charging an illegal upfront fee that they claimed went towards their student loan balance.
“None of the funds collected by the defendants was disbursed for consumer student loans,” the FTC said.
The 34-page complaint also alleges the companies made false promises and pressured borrowers into predatory high-interest loans in order to pay upfront fees. The companies, along with at least five other defendants, targeted consumers struggling with student loan debt in a ‘nationwide debt relief telemarketing scam’ from November 2014, prosecutors wrote.
Student advocates would call and tell borrowers they were eligible for a federal debt reduction program to have some or all of their student loans forgiven, according to the complaint. During the calls, the company also quoted borrowers for a new, lower student loan payment that ultimately resulted in a fee of $1,300 to $1,400.
Further, Student Advocates never told consumers who signed up for a credit agreement with Equitable Acceptance Corporation “that they would pay interest on the EAC loan to pay the $1,300 to $1,400 fee or that the annual percentage rate of this loan was generally between 17% and 22%”.
The companies have since been banned from providing debt relief services after reaching an agreement with the FTC.
Under the agreement, Student Advocates and EAC were not allowed to collect payments from borrowers who purchased their services and had to repay some of the money.