Dive Brief:
- Illinois Attorney General Lisa Madigan was to file lawsuits today against two companies accused of defrauding people trying to reduce or eliminate their student loan debt.
- The lawsuits are planned against Broadsword Student Advantage in Texas and First American Tax Defense in Chicago.
- According to Madigan, the two companies are unlicensed, and they used deceptive marketing practices and illegally charged upfront fees for debt reduction and elimination services, the Chicago Sun-Times reported.
Dive Insight:
This is apparently the first such lawsuits in the country. As student loan debt has climbed past the $1 trillion mark, debt settlement companies are increasingly drawn to the market. The New York Times reports that the number of complaints with the Federal Trade Commission about debt settlement and debt collection companies climbed to 204,644 in 2013, up about 10% from 2011.
In a press release, the Illinois Attorney General’s office says that the two companies “sought to scam vulnerable people into paying as much as $1,200 upfront for bogus services, including the fake ‘Obama forgiveness program,’ or for government services that are already free of charge.” The lawsuits state that companies have violated the Illinois Consumer Fraud and Deceptive Business Practices Act, the Credit Services Organizations Act, and the Debt Settlement Consumer Protection Act.