A consumer watchdog group says federal and state governments need to crack down on companies offering sketchy student loan “relief.”
In a new report, the National Consumer Law Center says that “given the many misrepresentations uncovered, it is unlikely that these companies are providing quality services in return for the money they are charging.”
The group made 10 “secret shopper” calls to 10 different companies, analyzed the websites of those and other companies, reviewed contracts and consumer complaints, and talked to regulators. Here’s what it found:
- Many characterize government programs as their own.
- Initial fees were up to $1,600 and monthly fees were $20 to $50, even though it wasn’t clear what ongoing service would be provided.
- None of the companies that were called listed their fees online, and most would not initially give an exact cost by phone.
- Many claimed to offer a broad range of services, but when pressed for details admitted offering only loan consolidation.
- Many featured inaccurate information about loan topics or plagiarized it from other sources (including the NCLC).
- Mandatory arbitration clauses, limiting consumer ability to sue, were common in contracts.
- Some companies said they needed the caller’s federal student loan PIN to provide assistance, raising privacy issues.
The report suggests that many of the companies are violating consumer protection laws. But even when companies aren’t breaking the law, there isn’t much they can do that you can’t do yourself — for free.
Here’s the Education Department’s information on loan consolidation, the primary service these companies offer. Here’s its page on loan deferment, forbearance and forgiveness programs. We have more advice on dealing with loans, and cutting the expense of college in the first place, in the links below.
This article was originally published on MoneyTalksNews.com as 'Debt Relief Firms Preying on Student Loan Borrowers'.