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Deanne Loonin National Consumer Law Center 617-542-8010 dloonin@nclc - PowerPoint PPT Presentation

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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 Basics About National Consumer Law Center. SLBA web site ( )

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Deanne loonin national consumer law center 617 542 8010 dloonin nclc


Deanne Loonin

National Consumer Law Center


Basics about national consumer law center
Basics About National Consumer Law Center “DEBT RELIEF” COMPANIES

  • SLBA web site (

  • 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 “DEBT RELIEF” COMPANIESReport (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 “DEBT RELIEF” COMPANIES

  • 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 working and it’s not enough

  • Limited assistance resources

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

We know it s complicated
We Know It’s Complicated! working and it’s not enough

Student Loans

Who is holding the loan:


Government Entity


Private Lender













Comparing to tax prep
Comparing to Tax Prep CONSUMERS

  • Problems with the analogy

  • Some companies steering consumers away from free services

Steering borrowers away from government servicers
Steering Borrowers Away From Government Servicers CONSUMERS

(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. CONSUMERS

Here is why you can’t trust your servicer:

Just A Few Major Servicers

  • Client Services, Inc. - BBB rating shows 87 complaints

  • Sallie Mae – Consumer Affairs Rating shows 1139 complaints


  • Sharing the Facts and Getting You On Your Way

  • Call us today

Misrepresentations and inaccurate info
Misrepresentations and inaccurate info CONSUMERS

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 CONSUMERStotalig 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 CONSUMERS

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


High fees and failing to disclose fees
High Fees and Failing to Disclose Fees CONSUMERS

  • 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? CONSUMERS

  • 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 CONSUMERS

Consolidation Factories, not individualized counseling

Aggressive sales tactics
Aggressive Sales Tactics CONSUMERS

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 CONSUMERS

  • 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 CONSUMERS

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 CONSUMERS


  • 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 CONSUMERS

  • 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 CONSUMERS

  • 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 CONSUMERS

  • Potential steering issues

  • Confusion

Harm to borrowers
Harm to Borrowers CONSUMERS

  • 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 CONSUMERS

  • 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) CONSUMERS

  • Limiting cancellations and refunds

  • Charging up front fees

  • Mandatory arbitration clauses