More than 23,000 student-loan borrowers are receiving compensation after 5 debt relief companies were accused of charging them with unnecessary fees. The compensation in question amounts to a total of roughly $19 million in checks, says Sheffey.On December 12, the Consumer Financial Protection Bureau (CFPB) announced that more than 23,000 students will be receiving compensation after 5 debt relief companies charged them with “unlawful advance fees”. On the very same day, Epiq Systems, a contractor with CFPB, distributed the compensation with a total of $19 million worth of checks. The said checks were received by the students in their mails.
The five companies accused by CFPB were namely, Docu Prep Center, Certified Doc Prep Services, Assure Direct Services, Direct Document Solutions, and Secure Preparation Services. According to the lawsuit filed by CFPB, the companies violated the Consumer Financial Protection Act (CFPA) and the Telemarketing Sales Rule (TSR). The companies collected unlawful advance fees for their debt relief services. The companies also made misleading descriptions of their services by stating that interest rates would decrease, credit scores would improve, and the U.S. Department of Education would give them support. Furthermore, the five companies, along with two mortgage companies namely, Monster Loans and Lend Tech Loans, violated the Fair Credit Reporting Act (FCRA). These companies marketed their debt-relief services to millions of consumers by using credit information that was illegally acquired from a national credit reporting company, as reported by an article in CFPB.
How Do Debt Relief Companies Work
Debt relief companies aim to help borrowers lower their monthly payments or apply for a loan forgiveness program. However, any fees must be disclosed ahead of time. Companies can also tell the borrowers that they are affiliated with the government but sometimes it can be fraudulent. For instance, any service affiliated with the Education Department must never cost anything and applying for debt relief must be through the federal government free of charge, says Sheffey.