Feds Say Bogus Debt-Relief Operation Just Left Consumers Deeper In Debt – Consumerist

Being elbows-deep in debt is a scary thing, so when a service tells you that you can “become debt free and enjoy financial independence” and that it can reduce how much you owe by “70 to 80 percent on average including all fees,” it might be tempting to give it a shot. But don’t be shocked when you end up scammed out of whatever money you have.

The Federal Trade Commission has charged California-based DebtPro 123 with deceiving customers in paying upwards of $10,000 for debt-relief services that promised to provide legal advice, settle debts, and repair credit, but mostly just left debtors in even worse financial shape than when they started.

According to the FTC’s complaint [PDF], the defendants would require that customers who signed on to the program give them access to directly debit their bank accounts. The company would then take out its fee of up to 20% of a customer’s total debt owed.

“Defendants collected their fees as a portion of the monthly payments, front-loading the fees,” reads the complaint. “For many consumers, more than half of their monthly payment went towards Defendants’ fees. For consumers who were in the program longer than eighteen months, Defendants also charged a $49 monthly
‘maintenance fee.’”

Feds Say Bogus Debt-Relief Operation Just Left Consumers Deeper In Debt – Consumerist

‘Debt relief’ firms misleading student loan borrowers | KMOV.com St. Louis

Firms offering student loan “debt relief” are deceiving borrowers into paying hundreds or even thousands of dollars for access to free government programs, according to a recent consumer watchdog report.

With student loan debt soaring to record levels, many graduates are turning to companies that claim to help reduce or manage their debts. However, some of these firms are charging borrowers initial fees as high as $1,600 and monthly fees as high as $50 to secure services that these borrowers could otherwise get for free, according to the report from the National Consumer Law Center.

While the government offers several relief programs free of charge, such as repayment plans based on a borrower’s income level, getting through the red tape is “rarely easy,” according to the report. And many borrowers are unaware that the programs even exist in the first place.

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Other concerns identified by the report included widespread use of mandatory arbitration clauses, requiring borrowers to sign over power of attorney and soliciting borrowers federal loan PIN numbers, which provide access to loan account information, raising privacy concerns.

In many cases, it appears the firms are violating numerous federal and state consumer protection laws that are already on the books, according to the report. As a result, the consumer group called on federal and state regulators to “step up to investigate these companies.”

‘Debt relief’ firms misleading student loan borrowers | KMOV.com St. Louis