The Federal Trade Commission yesterday announced it has secured a temporary restraining order against a student loan debt relief operation it says misled consumers, impersonated the federal government, and collected millions in illegal upfront fees. A federal court in California granted the order, freezing assets and halting the company’s activities while the case moves forward.
The FTC’s complaint alleges that the companies and their operators marketed student loan debt relief services by cold calling consumers, including individuals listed on the National Do Not Call Registry, and falsely claiming they were affiliated with the Department of Education or borrowers’ loan servicers. According to the agency, those claims were used to convince consumers to enroll in programs that promised loan forgiveness that never materialized.
Regulators say the operation has been active since at least early 2022 and generated millions in revenue by charging consumers upfront fees that often reached into the hundreds or thousands of dollars, along with recurring monthly payments. The FTC alleges these fees were collected before any services were performed, a key violation of the Telemarketing Sales Rule. In many cases, consumers were instructed to stop making payments on their loans, which allegedly led to increased balances, additional fees, and declining credit scores.
The complaint also details how telemarketers allegedly used deceptive tactics to gain trust, including reciting consumers’ personal information and requesting access to their federal student aid accounts. Once enrolled, many consumers reportedly saw little to no progress toward loan forgiveness, with some never having applications submitted on their behalf at all.
In granting the restraining order, the court found there is good cause to believe the defendants violated multiple laws, including the FTC Act, the Telemarketing Sales Rule, the Impersonation Rule, and the Gramm-Leach-Bliley Act. The court also determined that immediate intervention was necessary to prevent further consumer harm and to preserve assets for potential refunds.
The order bars the defendants from making misleading claims about debt relief services, prohibits the collection of advance fees, and restricts telemarketing practices that violate federal rules. It also freezes assets, limits access to customer information, and allows the FTC to move quickly with discovery and oversight of the business.
Read the temporary restraining order. Read the complaint.
