FTC Sues Student Loan Debt Relief Organizations

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May 26, 2016

student-loan-debtLast month, the Federal Trade Commission (“FTC”) and the State of Florida commenced an action against Consumer Assistance, LLC, Consumer Assistance Project Corp., Palermo Global, LLC and the principal of all 3 organizations, Chastity Valdes (collectively, the “Defendants”).  The Defendants are alleged to have falsely promised to assist consumers in obtaining relief from student loan debt.

How did the Student Loan Debt Relief Organizations Violate the Law?


FTC’s Allegations against Student Loan Debt Relief Organizations

According to the complaint, the Defendants have marketed themselves as being able to provide relief to consumers with student loan debt.  Specifically, the Defendants have claimed that they can eliminate as much as 90% of student loan debt through certain government programs.  However, in most cases, according to the FTC, consumers are unable to comply with the strict requirements for student loan debt relief available under such programs.  The Defendants also promised to review loan documents for errors that could relieve consumers from their obligations to pay off their debts.  However, according to the FTC, the Defendants in fact never reviewed such documents and instead simply sent form letters to lenders that did not result in any debt relief for consumers.  The FTC further alleged that the “Defendants have also falsely represented that they repair consumers’ credit.  But most or almost all consumers do not have their credit repaired by Defendants.”

The FTC recently filed a motion seeking to enjoin Defendants from continuing their business operations.  The Defendants have been served and are expected to soon make an appearance in the action.

Protect Yourself

As we recently blogged, the FTC has been extremely active in bringing lawsuits against companies for failing to deliver on promises of debt relief.  The FTC has been especially active in the realm of companies promising to aid in relieving student loan debt.  In this regulatory climate, it is extremely important that companies advertising debt relief or credit repair of any kind consult with competent counsel to avoid the scrutiny of the FTC or any other federal or state regulatory agency.

If you are interested in learning more about this topic, please visit the Telemarketing Law practice area of our website.  If you have been served with process concerning your debt relief/credit repair services or your marketing practices in general, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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