FTC: Student Debt Relief Scheme Boss Agrees to $11 Million Settlement

By Allie Bidwell, NASFAA Senior Reporter

The leader of a California-based student loan debt relief scam last week agreed to an $11 million settlement with the Federal Trade Commission (FTC), admitting that he swindled borrowers out of hundreds of dollars under the guise of lowering their monthly payments or securing them loan forgiveness.

The ringleader, Tuan Duong, previously came under fire from FTC in 2015 for a mortgage relief scheme. FTC sued Duong as part of its Operation Mis-Modification, “a joint federal-state enforcement initiative against six fraudulent mortgage relief schemes.” A final order in 2016 banned Duong from mortgage loan modification and debt relief business.

Still, a November 2018 complaint from FTC alleged that Duong and others deceived student loan borrowers by promising to reduce their monthly loan payments or secure them loan forgiveness—for an upfront fee of $300 or more. The defendants also claimed to have a 96% success rate and a service guarantee. But for many borrowers, those promises did not materialize and they lost hundreds of dollars, while some ended up owing more after enrolling in these programs, according to the complaint.

As a result, a federal court temporarily halted the companies’ practices and froze their assets.

A proposed modified final order against Duong, filed last Wednesday, contains an $11 million judgment and permanently bans him from the telemarketing industry. In agreeing to the settlement, Duong also admits that he violated the 2016 order against him.

As student loan debt has become a greater concern for consumers in recent years, third party companies that attempt to make money off borrowers by promising debt relief have grown. Such companies also often attempt to lure borrowers into a scam by charging for services that borrowers—unbeknownst to them—could enroll in for free, such as loan consolidation or income-driven repayment.

FTC and the Consumer Financial Protection Bureau (CFPB) have taken legal action against several third-party agencies found to request upfront fees for federal student loan services, claim affiliation with the Department of Education (ED) or pose as ED itself, and promote nonexistent loan forgiveness programs and lower monthly payment programs, without specifying those services are already available through the federal government.

ED has worked to raise awareness on third-party debt companies in the last several years. Further, FTC offers advice about student loan debt relief in English and Spanish, and lists on its website every company and person banned from debt relief services.

 

Publication Date: 6/3/2019


David S | 6/3/2019 11:35:04 AM

Great to see someone get busted for this, but I imagine that this is a tiny tip of a huge iceberg. These are fly-by-night operations designed to be almost impossible to track down. In a case of delicious irony, I get these calls on my direct office line (I'm sure I'm not the only one). So far my record is perfect...every time I decide to press 1 to speak to a helpful student loan advisor and I tell them what I do for a living, they hang up on me. But once I started jotting down the number showing up on my caller ID, and it was never the same number twice.

There's no telling how many borrowers have fallen for this, and while there's no way to prevent all evil from being inflicted in the world, we as financial aid professionals need to play a role in stopping or at least slowing these thieves down by making sure our students are armed with enough information that they can spot a scam when they see one.

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