By Aneesa Grant, The Seattle Medium
Washington State Attorney General Bob Ferguson recently announced the recovery of more than $2 million from nearly three dozen debt adjusters who were found guilty of exploiting student borrowers through unfair and deceptive practices. These unscrupulous entities unlawfully charged exorbitant fees, often in the tens of thousands of dollars, affecting thousands of Washingtonians.
Ferguson’s efforts to secure these recoveries are part of the broader Attorney General’s Student Loan Initiative. The initiative aims to provide assistance to borrowers navigating the complexities of enrolling in and repaying student loans.
This year alone, Ferguson’s office successfully resolved cases against three out-of-state debt adjusters. As a result, these entities are now required to pay $359,832 in restitution to 495 affected borrowers in Washington. Every impacted individual is receiving a full reimbursement for unlawfully charged fees. Overall, the initiative has already aided 2,652 Washington consumers by settling cases involving 35 entities, with an average payment of nearly $800 per borrower.
This achievement is particularly significant as it aligns with the restart of federal student loan payments, a potentially tumultuous period for millions of borrowers.
“It is a chaotic time for millions of borrowers as student loan repayments resume after more than three years. My office is committed to protecting Washingtonians from companies that take advantage of consumers who are simply trying to manage their debt,” said Ferguson.
Consumers who suspect they may have been charged excessive fees are encouraged to submit a complaint to the Attorney General’s Office Consumer Protection Division.
Debt adjustment firms offer to help students complete and submit paperwork to the U.S. Department of Education to consolidate their federal student loans. However, borrowers should be aware that information about repayment options and assistance with consolidating federal student loans is readily available, free of charge, directly from the U.S. Department of Education. Borrowers can also contact their current loan servicers for information on consolidation and repayment options, such as income-based repayment.
Under the Debt Adjustment Act, the maximum upfront fee allowed for a debt adjuster is $25. The companies under investigation were found to charge upfront fees ranging from several hundred to thousands of dollars. Borrowers were also hit with monthly “monitoring” fees that exceeded the legal limit, often without a clear understanding that these fees would extend throughout the life of the loan. The law restricts monitoring fees to no more than 15% of the payment amount, meaning a person paying $300 a month should not be charged more than $45 per month in monitoring fees.
Other deceptive practices by these debt adjusters included making false claims of affiliation with the federal Department of Education, aggressively marketing “student loan forgiveness” for ineligible loans, falsely advertising the employment of student loan “experts” without relevant industry experience, and promising to expedite loan consolidation despite lacking the ability to do so.
The restitution obtained from all these financial entities amounts to $2,004,205, averaging $755 per affected consumer. Additionally, the resolutions require payment of $321,035 in attorneys’ fees to cover the costs of the investigations.
One of the most recent resolutions involved Skyway Financial Group, stemming from a swift investigation that began in late spring. The agreement ensures that 188 Washington borrowers receive a total of $139,591 in restitution from Skyway, and it prevents the company from engaging in unlawful practices in Washington state.
Other resolutions achieved this year include:
• Student Aid Group: An investigation initiated in October of the previous year resulted in payouts of $45,635 to 98 borrowers, with an additional $7,000 in attorneys’ fees.
• Allied Financial: An investigation initiated in November of the previous year led to $174,606 in restitution for 209 borrowers, along with $7,000 in attorneys’ fees.
According to the Attorney General’s Office, these actions reflect their commitment to protecting the rights and financial well-being of Washington’s student borrowers, ensuring they receive fair treatment in the challenging landscape of student loans.
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