SoFi sues to block Biden's student loan repayment pause
The lawsuit filed by SoFi Bank questions the legality of the latest extension and claims it has cost the company up to $8 million in lost profits.
LEARN MOREMay 8, 2023
The Federal Trade Commission said that it has stopped a student debt relief scheme that has allegedly stolen $12 million from borrowers.
The FTC accused the companies of "deceptive claims about repayment programs and loan forgiveness that did not exist." The FTC said SL Finance LLC, BCO Consulting Services Inc. and SLA Consulting Services Inc. and their respective owners lured consumers looking to pay down their student loans.
The companies were said to have charged borrowers, many of whom are considered "low-income," large upfront fees.
"The defendants tricked consumers into believing they were enrolled in a legitimate loan repayment program, that their loans would be forgiven in whole or in part, and that most or all of consumers' payments to the companies would be applied to their loan balances. In reality, the defendants were pocketing students' payments," the FTC said.
SL Finance LLC claims to have assisted nearly 9,500 clients, saving them an average of about $26,000. The company claims they can cut monthly payments by 30% to 80%.
Among the complaints made by the FTC, the companies allegedly did not apply payments made by clients toward their student loans.
The FTC noted that because federal student loan payments have been on pause since March 2020 due to the pandemic, borrowers would not be contacted by servicers that they are behind on payments.
Following the FTC’s complaint, a federal court temporarily halted the companies and froze their assets. The FTC's case will be heard by a federal judge.
"As Americans struggle with massive student loan debt and uncertainty around the prospect of forgiveness, scammers are looking to cash in," said Samuel Levine, Director of the FTC's Bureau of Consumer Protection. "These lawsuits to shut down student loan debt relief schemes continue the agency's crackdown on junk fees, unwanted calls, and financial exploitation."
