Illinois to become first state to take on ‘scams’ in court
Illinois on Monday will be become the first state in the country to file a lawsuit against ‘debt settlement’ companies that prey on students buried in debt, The New York Times reports.
Illinois Attorney General Lisa Madigan is filing two lawsuits against Broadsword Student Advantage LLC, based in Texas, and First American Tax Defense LLC, based in Chicago. Madigan charges that these companies “engaged in deceptive marketing practices and illegally charged consumers hundreds of dollars in upfront fees to reduce or eliminate their student loan debt burden,” according to a press release from the Attorney General’s office.
In response to the over $1 trillion in U.S. student debt, the debt settlement industry has taken aim at student loans, ostensibly offering—for a price—to help people saddled in student debt reduce their monthly payments by negotiating directly with lenders.
Yet, according to the Illinois suit, which was viewed by the Times, these companies often convince students to pay large upfront fees only to mislead them on what they can deliver in terms of reducing monthly payments. Furthermore the suit charges that the businesses falsely claim affiliation with federal relief programs and charge people for assistance they could have received for free from the federal government.
Allegations that these companies scam desperate borrowers extend beyond these two businesses. According to a report released last year by the National Consumer Law Center, the industry is plagued with similar abuses and deceptions, including a “shocking number of inaccuracies about consolidation, garnishment, rehabilitation, bankruptcy, and other critical topics.” And according to the Times, hundreds of thousands of borrowers across the U.S. have filed complaints with the Federal Trade Commission.
“It’s just, unfortunately, the latest scam on the largest group of people who are struggling with the most debt,” Madigan told the Times.
This article was originally published on Common Dreams.