Minnesota is suing three Southern California-based companies that the state says defrauded student-loan borrowers trying to access federal debt relief services.
Attorney General Keith Ellison's office joined the federal Consumer Financial Protection Bureau and other plaintiffs this week in alleging the three firms ran a scheme that charged customers illegal fees and plied them with false promises of student loan forgiveness. A federal judge granted a temporary restraining order that halted the operations of Consumer Advocacy Center (also doing business as Premier Student Loan Center), True Count Staffing (SL Account Management) and Prime Consulting (Financial Preparation Services) and installed a receiver to oversee their assets.
Ellison's office said the companies collected hundreds of thousands of dollars from more than 1,000 Minnesota borrowers — part of some $71 million in fees they charged consumers across the country.
"Minnesotans just want to be able to afford their lives; the cost of student loans that too many people have to take out to do that is already too high," said Ellison in a statement. "It boils my blood when fraudsters then come along and prey on them."
In a response filed in court, the defendants said the suit is based on "stale evidence as well as vague testimony of a statistically insignificant number of cherry-picked consumers and rogue employees." They say they offered customers a lawful and valuable service in helping them navigate the complexities of the "byzantine" federal student-loan consolidation and modification process.
An e-mail to Consumer Advocacy Center and a call to an attorney for the defendants were not immediately returned.
Ellison's office, which announced the litigation in a news release this week, said the identities of Minnesota consumers who filed complaints about the three companies are confidential investigative data.
The suit alleges that the three companies charged more than $1,300 for help consolidating or modifying customers' loans — services it says federal student-loan borrowers can access for free through the U.S. Department of Education. The litigation says the firms deceived consumers by suggesting that these payments would count toward paying down their debt. They also allegedly submitted false information about the borrowers' family sizes, marital status and income to help them qualify for lower monthly payments.
Ellison's office started investigating Consumer Advocacy Center in 2018. The company filed for bankruptcy this year.
In court records, the defendants say they clearly and accurately represented their services to consumers. One company, True Count Staffing, said it developed a software program — a bot named "Ultron" — to help it zero in on any employees who were "cutting corners or engaging in potentially noncompliant activities." The companies insist that incidents cited by the Consumer Financial Protection Bureau were the work of "rogue sales employees" who were promptly disciplined or fired.
Ellison's office is encouraging customers of the three companies to contact staff at 651-296-3353 and 1-800-657-3787 or to submit an online complaint on its website, ag.state.mn.us/Office/Complaint.asp.