THE DANGERS, ABUSES AND FALSE PROMISES OF STUDENT LOAN “DEBT RELIEF” COMPANIES
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THE DANGERS, ABUSES AND FALSE PROMISES OF STUDENT LOAN “DEBT RELIEF” COMPANIES October 9, 2014 AFSLR Conference. Deanne Loonin National Consumer Law Center 617-542-8010 [email protected] Basics About National Consumer Law Center. SLBA web site ( www.studentloanborrowerassistance.org )

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Deanne loonin national consumer law center 617 542 8010 dloonin nclc

THE DANGERS, ABUSES AND FALSE PROMISES OF STUDENT LOAN “DEBT RELIEF” COMPANIESOctober 9, 2014AFSLR Conference

Deanne Loonin

National Consumer Law Center

617-542-8010

[email protected]


Basics about national consumer law center

Basics About National Consumer Law Center

  • SLBA web site (www.studentloanborrowerassistance.org)

  • Manual (Student Loan Law) and other publications

  • Case consultations

  • Policy advocacy

  • Direct Client Representation (low-income borrowers)


Searching for relief report june 2013 key findings

Searching for Relief Report (June 2013)Key Findings

  • Companies mischaracterizing government programs as their own

  • Charging high fees for programs that are available for free

  • Failing to disclose fees

  • Selling a One-Size Fits All Approach

  • Providing Inaccurate Information

  • Making Misrepresentations and False Promises

  • Focusing on Sales, Not Counseling


Mischaracterizing government programs

Mischaracterizing Government Programs

  • Describing programs without referring to standardized government product

  • Making up proprietary names for government programs


Afslr guidelines are a start but self regulation isn t working and it s not enough

AFSLR Guidelines are a start, but self-regulation isn’t working and it’s not enough

  • “When it comes to government consolidation programs, we strongly endorse the National Consumer Law Center's guideline that no student loan relief company should ever hold ANY government program to be one of their own.  This is misleading to the consumer and should not be a part of any reputable company's sales tactics.  We also encourage all companies, whether they are members of AFSLR or not, to become more educated on the various relief options that are available to consumers.  Everyone's situation is unique and must be treated as such.”


Demand for assistance is real

Demand for Assistance is Real

  • Limited assistance resources

  • Problems with servicers (see NCLC reform paper on servicing)


We know it s complicated

We Know It’s Complicated!

Student Loans

Who is holding the loan:

Federal

Government Entity

Private

Private Lender

Direct

FFEL

Perkins

Institutional

Traditional

School

Stafford

PLUS

Unsub

Grad

Parent

Sub


Deanne loonin national consumer law center 617 542 8010 dloonin nclc

DEMAND FOR QUALITY SERVICES CANNOT BE AN EXCUSE TO RIP OFF CONSUMERS


Comparing to tax prep

Comparing to Tax Prep

  • Problems with the analogy

  • Some companies steering consumers away from free services


Steering borrowers away from government servicers

Steering Borrowers Away From Government Servicers

(quoted from 2014 email)

I wanted to follow up with you just in case your current student loan servicer has reached out to you in an attempt to help you reduce your current loan payments and I want to say DON’T DO IT.  The programs they can offer you are not nearly as beneficial to you as what the government has established for you, that’s what [name deleted] will get you an approval for.  At [name deleted] we only enroll our clients into government approved programs run by the Department of Education that provide true debt forgiveness, these programs are complex but don’t worry we can help.


Steering example cont

Steering Example, cont.

Here is why you can’t trust your servicer:

Just A Few Major Servicers

  • Client Services, Inc. - BBB rating shows 87 complaints http://www.bbb.org/ClientServicesInc

  • Sallie Mae – Consumer Affairs Rating shows 1139 complaints

  • http://www.consumeraffairs.com/finance/sallie_mae.html

  • Sharing the Facts and Getting You On Your Way

  • Call us today


Misrepresentations and inaccurate info

Misrepresentations and inaccurate info

Actual Examples

  • Looking for Obama Student Loan Relief?

    Act now while you can! Congress can discontinue these programs at any time!

    Obama’s federal student loan programs will not

    be around forever.

  • Illinois AG Lawsuit


Deanne loonin national consumer law center 617 542 8010 dloonin nclc

  • Due to your student loan(s) estimated balances totalig over $20,000; you are now eligible to receive benefits from the new law that has passed regarding federal student loans including TOTAL FORGIVENESS in some circumstances…Call within 30 days.


More examples

More Examples

1. After 12 months of nonpayment, not eligible to consolidate

2. Can’t include defaulted loans in consolidation, so sell a separate rehab/consolidation package

3. Rehabilitation is a two step process because ineligible if in default, so rehabilitate, then consolidate (lose both options for the future among other problems)

4. Can’t discharge student loans in bankruptcy

ALL FALSE


High fees and failing to disclose fees

High Fees and Failing to Disclose Fees

  • Charging Up front fees (legal violations)

  • Recent contract: 6 installments = $699 PLUS monthly fee

  • Upfront fee of $796

  • Fees to “maintain” consolidation?

  • Even charging for TPD…


What do the companies do

What Do The Companies Do?

  • Guaranteed delivery of paperwork?

  • Guarantee that borrowers will meet ED underwriting (??)

  • Special expertise ?

  • Negotiate special deals ?


Selling a one size fits all approach

Selling a One-Size Fits All Approach

Consolidation Factories, not individualized counseling


Aggressive sales tactics

Aggressive Sales Tactics

Actual Examples

  • Pre-approval only available for 72 hours

  • A quick 5 minute call can save you thousands

  • Guaranteed results

  • 98.75% satisfaction rate (based on clients who have retained services vs. filed client complaints)

  • We’re student loan experts


Focusing on sales not counseling

Focusing on Sales, not Counseling

  • Lead generators: They are everywhere!

    Selling fully automated PIN retrieval, student loan retrieval, repayment options (with just one click)

  • Paying on commission


Lead generator example

Lead Generator Example

I am a GENERATING SOURCE for Real Time Student Loan Leads.

REAL TIME means less than 24hrs old.

  • $5 per lead, wholesale pricing. Info includes name, address, direct line/mobile number, email, FEDERAL/ private, how many LOANS EXISTING and the BALANCES on those loans.

  • Leads are sold EXCLUSIVLEY to the buyer.

  • Can contact me on my cell for more info. 


More lead generating

More Lead Generating

  • STUDENT CONSOLIDATION LEAD PRICING

  • Press 1 Calls----$23.00(Minimum 50 Call Buy)Unfiltered Web Calls--$17.00(Minimum 75 call Buy) 

  • ALSO AVAILABLE:RealTime or Aged Opt-In Leads!!Call For Price Quote!!


Sales sales sales

Sales, sales, sales

  • From Chronicle of Higher Education, 8/4/14: Sales reps don’t mention the downsides of consolidation. Trained to quote payments based on current income and not tell callers payments will increase if salaries increase.

    “The people they are ripping off are the poor or middle class”


Privacy issues

Privacy Issues

  • Requiring notarized POAs

  • Require ADOI (why?)

  • FAFSA PIN (required) and privacy prompts

  • SSN

  • ED Ombudsman: PIN is the equivalent of a signature

  • We are a consumer advocacy group…(obtained records through public prescreened records)


New servicer choice issues

New Servicer Choice Issues

  • Potential steering issues

  • Confusion


Harm to borrowers

Harm to Borrowers

  • Lose $

  • Potentially lose rights and access to important programs

  • Lose control over accounts (POA)

  • Give up privacy, marketing target


Potential legal violations

Potential Legal Violations

  • Illinois AG—see complaint for violations

  • CROA

  • State UDAP

  • State Registration and Licensing Laws

  • UPL (disclaiming not enough), document prep

  • POA issues


More legal violations non exhaustive

More legal violations (non-exhaustive)

  • Limiting cancellations and refunds

  • Charging up front fees

  • Mandatory arbitration clauses


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