On December 11, the Consumer Financial Protection Bureau issued an advisory warning to consumers about student loan debt relief companies. While the CFPB warns all student borrowers, in distress or otherwise, to steer clear of companies with aggressive marketing tactics that make promises that they can save student borrowers thousands of dollars on student loan debt, it is also taking steps to stop these companies from engaging in illegal practices. Specifically, the CFPB, in a joint filing with Florida’s Attorney General, shut down student loan debt relief company College Education Services and filed a lawsuit against Student Loan Processing.
The CFPB’s advisory provides useful tips to help student borrowers recognize red flags frequently associated with student loan debt relief scams, including:
- Upfront fees: Student loan debt relief companies should not require the payment of an upfront fee up or signing of a contract prior to explaining how they will be able to assist the student borrower. The CFPB notes that “[n]ot only is free assistance available through your student loan servicer, many times taking payment for debt relief services before providing help is illegal.”
- Promises of loan forgiveness or cancellation: Student loan debt relief companies will make false promises that they have the ability to negotiate with student loan creditors under federal student loan programs. This is a lie.
- Signing documents, such as a third party authorization or power of attorney: Student loan debt relief companies should not require the signing of a “third party authorization” or a “power of attorney”. These documents may allow the student loan debt relief company to talk directly to student loan servicers.
- Requests for your Federal Student Aid PIN: Student borrowers should not give away their Federal Student Aid Personal Identification Numbers and should be overly cautious of any company that asks for it. The CFPB provides that “[h]onest companies will work with you to come up with a plan and will never use your PIN to access your student loan information.”
The CFPB’s warning clearly admonishes consumers to be cautious of student loan debt relief companies that make promises that are too good to be true, because they usually are.