That's the name of this new study by Deanne Loonin and Jillian McLaughlin of the National Consumer Law Center. They explain that
A student loan "debt relief" industry has sprung up in response to the
demand for student loan borrower assistance and this report documents
multiple problems as well as potential violations of consumer federal
and state laws. Given the many misrepresentations uncovered, it is
unlikely that these companies are providing quality services in return
for the money they are charging. Such practices severely compound the
pain of vulnerable consumers seeking to find resolutions to difficult
student debt problems. The U.S. Department of Education should make it
easier for student loan borrowers to access its borrower assistance
programs, and federal and state authorities should ensure that these
companies comply with the law so that consumers truly understand what
services they are buying.
Read the study's executive summary and NCLC's press release. Read the comprehensive list of recommendations here or after the jump.
Recommendations
The following recommendations are intended to help ensure that only borrowers that truly want these services and know what they are getting buy them.
Improve Government Bureaucracy and Simplify Student Loan Relief Programs
Student loan debt relief companies go too far in selling how difficult it is for consumers to get relief from the federal government on their own. Yet, the reality is that the government does not have an efficient system for informing borrowers of these programs or of administering them efficiently and according to the law. One of the best ways to keep these companies in check is for the government to improve its administration of its own programs. This will more easily be done if the programs are simplified.
Require Fair and Reasonable Fees
• All companies must disclose fees online and in all calls with consumers.
• The companies must not charge advance fees in violation of federal law before services are completed.
• Companies should charge only fees that are bona fide and reasonable. This will likely mean that any fees for ongoing assistance with loan consolidation are unreasonable.
Prohibit Misleading Advertisements or Representations
• Companies must not engage in false, deceptive or misleading advertising, including improperly stating or implying affiliations or connections with government agencies.
• Companies must prominently disclose if their programs are government programs and if so that these programs are available at no cost through the government.
• Claims about performance must be transparent and verifiable.
• Claims about borrower rights and the requirements of student loan programs must be accurate and up to date.
Safeguard Consumer Privacy
• Companies must not request or require borrowers to provide PIN numbers for the National Student Loan Data System (NSLDS). The U.S. Department of Education should investigate these practices in order to preserve the integrity of the student loan database.
• Companies must provide information about the potential dangers of signing power of attorney documents and comply with all applicable laws regarding such documents.
Refunds
Refunds should not be as much of a concern if companies comply with applicable laws and do not charge any fees until services are completed. However, the companies must at a minimum refund any funds received if the consumer does not qualify for a program or otherwise has grounds for refund.
Other Consumer Protections
• Commissions should not be allowed based on numbers of borrowers enrolled in particular programs.
• Transparency is critical. The companies must not only disclose all fees online and in response to requests for information, but also provide sample contracts upon request and verification of performance information.
• Comply with all applicable consumer laws, state and federal, including cancellation rights.
• Companies must comply with unauthorized practice of law provisions.
• Mandatory arbitration and other contract provisions limiting consumer access to justice should be banned.
student loan "debt relief" industry has sprung up in response to the
demand for student loan borrower assistance and this report documents
multiple problems as well as potential violations of consumer federal
and state laws. Given the many misrepresentations uncovered, it is
unlikely that these companies are providing quality services in return
for the money they are charging. Such practices severely compound the
pain of vulnerable consumers seeking to find resolutions to difficult
student debt problems. The U.S. Department of Education should make it
easier for student loan borrowers to access its borrower assistance
programs, and federal and state authorities should ensure that these
companies comply with the law so that consumers truly understand what
services they are buying. – See more at:
http://www.nclc.org/issues/searching-for-relief.html#sthash.4EhwO0Zl.dpuf
