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Attorney General Madigan Brings Consumer Fraud Claims Against Student Loan Debt Settlement Companies

Whenever there are large loans, there are bound to be targets for debt settlement companies. These are companies that tell borrowers that they will negotiate lower monthly fees for the borrower in exchange for a hefty upfront fee. They convince borrowers to pay them hundreds, if not thousands, of dollars, then they leave the borrowers with the same debt they had to begin with. One such company, Broadsword Student Advantage of Carrollton, Texas, has a radio advertisement which claims “Your entire student loan can be forgiven.” In the past, these fraudulent companies targeted those with large credit card debt or mortgage loans. The recent economic downturn left those who owed more on their property than it was worth as prime targets for those companies, but now they have a new group of targets.

The amount that Americans currently owe in student loans has exceeded $1 trillion, and to make matters worse, a record number of college graduates entered the workforce just as the economy was taking a nosedive, resulting in high unemployment and underemployment rates. More than half of recent graduates are either unemployed or are working low-paying jobs that don’t require the expensive college degrees that they are still struggling to pay off. An estimated seven million Americans have already defaulted on a total of $100 billion in loans, with tens of thousands of more borrowers defaulting each month.

Illinois is now expected to become the first state to bring legal action against debt settlement companies in connection with student loans. The action consists of two separate lawsuits, one against Broadsword Student Advantage and one against First American Tax Defense, alleging that both companies convinced vulnerable borrowers to pay hundreds of dollars for services that the companies never provided. In the case of Broadsword, the company allegedly continued to charge borrowers $49.99 each month after they had paid an initial fee.

The lawsuits, brought by Lisa Madigan, the Illinois attorney general, alleges that the companies misled customers about the fees they were charging, and in some instances, even pretended to be affiliated with several federal relief programs. Madigan alleges that the companies charged customers for debt assistance that the customers could have gotten from the Education Department. First American allegedly offered services that were related to the Obama Forgiveness Program, a bill that the company claimed had recently been approved by Congress, but no such program exists. First American also allegedly pretended to be affiliated with the Education Department and pressed borrowers to make payments by phone, which is in direct violation of state law.

Even before Illinois brought its legal action against these two companies, the Federal Trade Commission had been inundated with hundreds of thousands of complaints of debt settlement and debt collection companies from borrowers all across the country. In Illinois, where debt settlement companies have bombarded the airwaves with advertisements, the sheer volume of sales pitches was enough to warn the attorney general. “Once you see posters, something is wrong,” said Madigan. In particular, Madigan said that companies are targeting teachers, police officers, firefighters, and nurses. In other words, those that are most vulnerable in an economic downturn.

Our Wheaton, Illinois consumer rights private law firm handles individual and class action predatory lending, unfair debt collection, lemon law and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totalling over a million dollars to organizations including the National Association of Consumer Advocatesthe National Consumer Law Center, and local law school consumer programs. The Chicago consumer lawyers at DiTommaso Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

Our Elgin and Aurora consumer attorneys provide assistance in fair debt collection, consumer fraud and consumer rights cases including in Illinois and throughout the country. You can click here to see a description of the some of the many individual and class-action consumer cases our Chicago consumer lawyers have handled. A video of our lawsuit which helped ensure more fan friendly security at Wrigley Field can be found here. You can contact one of our Skokie consumer protection attorneys who can assist in consumer fraud, consumer rip-off, lemon law, unfair debt collection, predatory lending, wage claims, unpaid overtime and other consumer, or consumer class action cases by filling out the contact form at the side of this blog or by clicking here.