California sentences student loan debt relief scammers

State Issues California State Attorney General Enforcement Consumer Finance Debt Relief Student Lending

On December 6, the California attorney general announced the sentencing of four individuals involved in a student loan assistance scam and related computer crimes. According to the AG, the individuals’ now-defunct company presented “itself as a legitimate source of help and feigned association with the U.S. Department of Education (ED) in order to gain the trust of distressed student loan borrowers and access their personal information.” Company employees “were directed to access and disrupt student loan borrower account data, as well as create new student borrower accounts while posing as the borrowers,” which violated the state’s computer crime laws the AG stated. Borrowers were convinced to pay fees of up to $1,300 in monthly payments in order to participate in the company’s loan payment reduction programs, which offered loan deferment and income-driven repayment. However, many of the borrowers were unaware that these payment reduction programs were already offered free of charge by the Department of Education. Moreover, borrowers did not know that their monthly payments were not a subscription service or applied towards their federal student loans, but were rather payments on a high interest loan. The AG contended that borrowers were purportedly required to continue making these payments even if they attempted to cancel the company’s services, and that “to facilitate the scam, the defendants used the Federal Student Aid website to illegally access student borrower records housed in computer systems belonging to ED.” In additional to their sentences of up to 180 days in prison, community service and probation, the individuals were ordered to pay restitution to harmed borrowers.