Consumer Finance Protection Bureau files suit against 26 defendants in student loan scam

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Consumer Finance Protection Bureau files suit against 26 defendants in student loan scam

Jacob Dougherty | U. Pittsburgh School of Law, US

January 13, 2020 02:51:33 pm

The Consumer Finance Protection Bureau (CFPB) filed a suit on Thursday against 26 defendants involved in a student loan repayment scam affecting more than 8.5 million consumers.

The suit is against Monster Loans and a “sham entity” known as Lend Tech that unlawfully obtained consumer reports from the consumer-reporting agency Experian (not included in the suit). They used the reports to provide data to other companies that marketed student-loan debt-relief.

The claim states that the defendant would use direct communication with consumers that falsely stated that consumers could obtain lower interest rates by consolidating loans, improve their credit score, and the United States Department of Education would become the “new servicer” of the consumer’s student loans. Additionally, the companies collected fees before providing services. The CFPB is seeking injunctive relief, compensatory damage for injured parties, and obtain punitive damages.

The CFPB is bringing this suit against 26 defendants including the entities engaged in the activities and high-ranking officials within those entities. The suit was filed in US District Court for the Central District of California where the defendants are based.

Between 2015 and 2019, Monster Loans purchased lists from Experian that contained the contact information for more than 7 million consumers with student loans. These lists are called “prescreened lists.” Monster Loans told Experian that these lists would be used to market mortgage products to the consumers. Instead, Monster Loans sold the lists to Student Loan Debt Relief Companies, which in turn marketed student debt products. Monster Loans assisted Lend Tech in the same scheme, selling prescreened lists of an additional 1.5 million consumers.

Additionally, the Student Loan Debt Relief Companies purchased the prescreened lists and used them to market service directly to consumers. These services included lower interest rates, enrollment in the Department of Education’s repayment and loan forgiveness programs, and improved credit scores. These claims were misrepresentations. One defendant collected illegal advanced fees for these “services” totaling more than $15 million.

The Consumer Finance Protection Bureau says these acts are in violation of the Telemarketing Act and the Consumer Finance Protection Act.

Martin Luther King Jr. wrote his Letter from Birmingham Jail

On April 16, 1963, an incarcerated Martin Luther King, Jr. (arrested for demonstrating in defiance of a court order) wrote his Letter from Birmingham Jail in response to a published statement by eight fellow clergymen from Alabama.

Part of the letter read: We have waited for more than 340 years for our constitutional and God-given rights. The nations of Asia and Africa are moving with jetlike speed toward gaining political independence, but we stiff creep at horse-and-buggy pace toward gaining a cup of coffee at a lunch counter. Perhaps it is easy for those who have never felt the stinging dark of segregation to say, "Wait." But when you have seen vicious mobs lynch your mothers and fathers at will and drown your sisters and brothers at whim; when you have seen hate-filled policemen curse, kick and even kill your black brothers and sisters; when you see the vast majority of your twenty million Negro brothers smothering in an airtight cage of poverty in the midst of an affluent society; when you suddenly find your tongue twisted and your speech stammering as you seek to explain to your six-year-old daughter why she can't go to the public amusement park that has just been advertised on television, and see tears welling up in her eyes when she is told that Funtown is closed to colored children, and see ominous clouds of inferiority beginning to form in her little mental sky, and see her beginning to distort her personality by developing an unconscious bitterness toward white people; when you have to concoct an answer for a five-year-old son who is asking: "Daddy, why do white people treat colored people so mean?"; when you take a cross-county drive and find it necessary to sleep night after night in the uncomfortable corners of your automobile because no motel will accept you; when you are humiliated day in and day out by nagging signs reading "white" and "colored"; when your first name becomes "nigger," your middle name becomes "boy" (however old you are) and your last name becomes "John," and your wife and mother are never given the respected title "Mrs."; when you are harried by day and haunted by night by the fact that you are a Negro, living constantly at tiptoe stance, never quite knowing what to expect next, and are plagued with inner fears and outer resentments; when you are forever fighting a degenerating sense of "nobodiness" then you will understand why we find it difficult to wait. There comes a time when the cup of endurance runs over, and men are no longer willing to be plunged into the abyss of despair. I hope, sirs, you can understand our legitimate and unavoidable impatience. Read the full text of the Letter.