Illinois on Monday will become the first state in the nation to sue the scamming 'debt settlement' companies that prey on students buried in debt.
Illinois Attorney General Lisa Madigan filed two lawsuits Monday morning against Broadsword Student Advantage LLC, based in Texas, and First American Tax Defense LLC, based in Chicago. Madigan's office charges that these companies “engage in "deceptive marketing practices and illegally charged consumers hundreds of dollars in upfront fees to reduce or eliminate their student loan debt burden," according to a statement emailed to Common Dreams
In response to the over $1.2 trillion in U.S. student debt impacting nearly 40 million people in the U.S., the debt settlement industry has taken aim at student loans, ostensibly offering—for a price—to help people saddled in student debt reduce their monthly payments by negotiating directly with lenders.
The Illinois lawsuit charges that these companies companies often convince students to pay large upfront fees only to mislead them on what they can deliver in terms of reducing monthly payments. Furthermore the suit charges that the businesses falsely claim affiliation with federal relief programs and charge people for assistance they could have received for free from the federal government.
Allegations that these companies scam desperate borrowers extend beyond these two businesses. According to a report released last year by the National Consumer Law Center, the industry is plagued with similar abuses and deceptions, including a "shocking number of inaccuracies about consolidation, garnishment, rehabilitation, bankruptcy, and other critical topics." And according to the Times, hundreds of thousands of borrowers across the U.S. have filed complaints with the Federal Trade Commission.