THE DANGERS, ABUSES AND FALSE PROMISES OF STUDENT LOAN “DEBT RELIEF” COMPANIESOctober 9, 2014AFSLR Conference Deanne Loonin National Consumer Law Center 617-542-8010 firstname.lastname@example.org
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 • 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 • 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 • “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 • Limited assistance resources • Problems with servicers (see NCLC reform paper on servicing)
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
Comparing to Tax Prep • Problems with the analogy • Some companies steering consumers away from free services
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. 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 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
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 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 • 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? • Guaranteed delivery of paperwork? • Guarantee that borrowers will meet ED underwriting (??) • Special expertise ? • Negotiate special deals ?
Selling a One-Size Fits All Approach Consolidation Factories, not individualized counseling
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 • 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 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 • 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 • 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 • 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 • Potential steering issues • Confusion
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 • 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) • Limiting cancellations and refunds • Charging up front fees • Mandatory arbitration clauses