The FTC has filed a lawsuit in a California federal district court against three interrelated student loan debt relief companies and the individual who is their majority owner for alleged violations of Section 5 of the FTC Act and the Telemarketing Sales Rule (TSR).  The TSR implements the Telemarketing and Consumer Fraud and Abuse Act.  While the CFPB appears to be embarking on a new strategic path in 2018 that will result in less aggressive enforcement, the lawsuit demonstrates that the FTC is continuing to target the debt relief industry for compliance with consumer protection statutes.  According to the FTC’s press release, the lawsuit represents the eighth action the FTC has taken in “Operation Game of Loans,” the FTC’s enforcement initiative targeting deceptive student loan debt relief scams.

The FTC alleges that the defendants violated Section 5 and the TSR by engaging in conduct that included the following:

• Sending mailers to consumers representing they were eligible for federal programs that would permanently reduce their loan payments to a fixed, lower amount or result in total loan forgiveness.  The FTC alleges these representations were deceptive in violation of Section 5 and material misrepresentations in violation of the TSR because while the Department of Education and state government agencies administer loan forgiveness and discharge programs, none of those programs guarantee a fixed, reduced monthly payment for more than one year, and most consumers are not eligible because of the programs’ strict eligibility requirements.
• Representing that consumers’ monthly payments were being applied to their loan balances.  The FTC alleges that this representation was deceptive in violation of Section 5 and a material misrepresentation in violation of the TSR because the defendants were charging consumers a monthly fee unrelated to their student loans that purportedly gave consumers access to various discounts and other benefits.
• Charging an advance fee for enrollment in a “financial education” program.  The FTC alleges that this fee violated the TSR advance fee prohibition.

The FTC’s complaint seeks consumer redress and injunctive relief.