The Federal Trade Commission has stepped in to halt a student loan debt relief scheme that it claims has bilked $23 million from thousands of consumers with false claims.
A federal court temporarily halted the scheme and froze its assets following an FTC complaint seeking to end the practices.
The complaint outlines how Mission Hills Federal and Federal Direct Group lured consumers into paying hundreds to thousands of dollars in illegal upfront fees with false promises to lower consumers' monthly student loan payments.
"Debt relief companies can't collect advance fees or masquerade as federal student loan servicers," said Andrew Smith, director of the FTC's Bureau of Consumer Protection. "Anyone asking for upfront fees to help with student loan debt is likely a scammer, and consumers should hang up and alert the FTC."
The defendants also allegedly tricked consumers into submitting their monthly student loan payments directly to the defendants by falsely claiming to take over servicing the consumers' loans. In reality, the defendants either only applied minimal payments on consumers' loans or, in many instances, applied none of the payments to the loans, diverting consumers' payments to themselves.
FTC also alleged that the defendants obtained consumers' student loan credentials, such as their FSA ID-a username and password used to log in to U.S. Department of Education websites-to log in and change consumers' contact information, effectively hindering or entirely preventing consumers' loan servicers from communicating with consumers.