Operators of alleged scheme claimed to be affiliated with the federal government and falsely promised to help reduce or even eliminate consumers’ student loans, agency says
The Federal Trade Commission obtained a temporary restraining order halting an operation that bilked consumers out of millions of dollars by pretending to be affiliated with the U.S. Department of Education and falsely promising student loan debt relief.
The FTC’s complaint against Arete Financial Group and several related companies alleged that the defendants used radio and television ads, as well as online ads and telemarketing calls in which they pretended to be affiliated with the Department of Education, to promise to enroll consumers in student loan forgiveness, consolidation, and repayment programs to reduce or eliminate their monthly payments and principal balances.
“Arete Financial Group charged illegal upfront fees and made false promises to consumers struggling with student loan debt,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “To avoid scams like these, consumers should never pay an advance fee to a company promising to deliver debt relief.”
The defendants allegedly charged illegal upfront fees as high as $1,800 when consumers agreed to use the defendants’ services. However, instead of delivering on the sweeping benefits they promised, operators of the scheme usually contacted a consumer’s loan servicer to place the consumer’s loans into temporary forbearance or deferment status, without the consumer’s authorization or knowledge, according to the FTC’s complaint.
The defendants are charged with violating the Telemarketing Sales Rule and the FTC Act.