FTC Refunds Over $4 Million to Student-Loan Borrowers

The Federal Trade Commission (FTC) recently announced that it would be issuing refunds totaling over $4.1 million to more than 27,000 student-loan borrowers who were allegedly scammed by debt relief companies.

Background

The refunds stem from accusations against South Dakota corporations Mission Hills Federal and Federal Direct Group, accused of deceiving borrowers with false promises of loan forgiveness. According to the FTC, these companies misled borrowers by claiming to reduce monthly payments and instructing them to divert payments away from federal servicers.

Complaint Allegations

In a 2019 complaint, the FTC detailed how the companies charged “illegal advance fees” ranging from hundreds to thousands of dollars per consumer. Despite these payments, borrowers seldom experienced reduced monthly payments, leading to additional interest accruing on their loan balances.

Legal Action and Ruling

Following the complaint, the US District Court for the Central District of California ruled in favor of the FTC in 2020. The ruling prohibited the companies from telemarketing and offering debt relief services to borrowers.

Refunds and Next Steps

Impacted borrowers are set to receive their refunds via mail and are advised to cash the checks within 90 days. For inquiries regarding the refunds, borrowers can reach out to JND Legal Administration, the company managing the refunds, at 844-566-0108. Additionally, the FTC’s refund information website offers further assistance.

Regulatory Crackdown

The FTC and the Consumer Financial Protection Bureau (CFPB) have intensified efforts to combat fraudulent practices in the student-loan industry. Notably, the CFPB recently announced a $10.9 million refund to over 8,000 borrowers following allegations against a California-based company.

Beware of Scams

With federal student-loan payments resuming after a three-year hiatus, the Biden administration has cautioned borrowers to remain vigilant against scammers. Borrowers are reminded that the Education Department provides federal repayment assistance free of charge, urging them to exercise caution when engaging with debt relief companies.