FTC’s “Operation Game of Loans” Bans Student Loan Debt Relief Scammers

Inside Subprime: Jan 23, 2019

By Grace Austin

In late 2017, the Federal Trade Commission (FTC) announced “Operation Game of Loans,” a federal-state enforcement initiative, after borrowers were stripped of more than $95 million in illegal fees from debt relief companies over the course of several years. Since then, arrests have been made and student loan debt relief firms have been banned. The FTC is also working to raise awareness among student loan borrowers. Student loan debt is a common setback for more than 44 million Americans. The average borrower graduates with $37,172 in student loan debt, an amount that can take decades to pay off. That debt also negatively impacts borrowers’ access to homeownership.

It’s no wonder that student loan borrowers are eager to erase debt, and scam artists prey on that desperation.

Here’s how you can protect yourself against these financially harmful schemes:

Never pay upfront fees.

Student loan borrowers shouldn’t have to pay for help getting out of debt. If you are in contact with a supposed debt relief business that requires upfront payment, that company is operating illegally, and you should file a complaint with the FTC.

Avoid signing a power of attorney.

Signing a power of attorney will allow a scam company to make decisions about your debt for you, which can be financially dangerous. Typically, the scam company will put your loans in forbearance, which temporarily halts the need for payments to the student loan provider. The company will instead collect the payments directly from you, and keep the money without paying down your debt. The borrower later discovers that the forbearance has expired.

Both forbearance and deferment can stop or reduce your monthly payments, but they should only be used as a short-term solution, according to the Federal Student Aid website. If a debt relief company puts your loans in forbearance, it’s a telltale sign of a scam.

Be cautious of offers that sound too good to be true.

There is no such thing as “quick relief” for student loan debt. But scammers will prey on borrowers’ hopes of getting out of debt quickly, making phony promises without providing specific details. There are legitimate loan forgiveness programs, but they typically require you to make payments for years before forgiveness is an option. Don’t fall for scammers’ offers to erase your debt fast.

Don’t pay for a payment plan.

Companies can legally provide help to borrowers, but if they ask for payment before setting you up with a payment plan, they’re ripping you off. According to the FTC, “Consumers can apply for loan deferments, forbearance, repayment and forgiveness or discharge programs directly through the U.S. Department of Education or their loan servicer at no cost.”

Check to make sure the company is accredited.

Before you accept help with your student loans, check to make sure the debt relief company is accredited with the Better Business Bureau and research reviews and complaints from customers.

Should you fall victim to a student loan debt relief scam, you should immediately change your FSA username and password and get in touch with your student loan provider to find out if any actions were taken on your loan. Next, block payments to the fraudulent company by contacting your bank, and file a complaint with the FTC. You can also report issues via the FSA feedback system.

For more information on payday loans, scams, and cash advances and check out our city and state financial guides including Florida, Illinois, Texas and more.

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