In a crackdown that is the first of its kind, the Federal Trade Commission and a handful of state attorneys general have partnered for a joint initiative against student loan debt relief scams. In what is dubbed “Operation Game of Loans,” Colorado has joined 10 other states and the District of Columbia.
According to a news release from the FTC, the operation has resulted in 36 state and FTC actions and five new cases filed against 30 debt-relief operations — three cases in the Central District of California and two in the Southern District of Florida.
Michelle Grajales, a staff attorney in the FTC’s Division of Financial Practices, who is on the FTC’s case against A1 DocPrep, Inc., said the state and federal actions in the operation all involve third-party debt relief companies charging consumers for their services. The cases allege a variety of actions in violation of the FTC’s Telemarketing Sales Rule and the FTC Act, ranging from charging consumers up-front fees to faking affiliation with the federal government or loan servicers.
According to the release, the scammers have collected more than $95 million in illegal upfront fees from consumers over several years. In each of the actions, the FTC has obtained temporary restraining orders to halt the scams and freeze the defendants’ assets. Third-party companies sometimes charge for services such as putting loan holders on income-based repayment plans, an option loan services offer for free. Grajales explained that while charging for services the consumer could get for free elsewhere is not necessarily illegal by itself, the actions alleged in the cases filed went far beyond.