New York – Attorney General Letitia James on Thursday August 8th , held financing company Equitable Acceptance Corporation responsible for violating consumer protection laws and the unlawful financing of student loan debt relief services.
“Higher education is supposed to be a gateway to prosperity, not a trapdoor to financial ruin,” said Attorney General Letitia James. “Equitable scammed students by offering worthless services that were available at no cost. No longer will Equitable be able to prey on New Yorkers, and they will, instead, be forced to wipe the slate clean and forgive the loans of those it victimized.”
The New York Attorney General’s Office brought a suit against Equitable and 11 other defendants in September 2018 for running a student loan debt relief scam involving thousands of student loan borrowers, including more than 4,000 New Yorkers that financed through Equitable. The companies deceived borrowers about the nature of their services and convinced these borrowers to pay over $1,000 for services that were, and continue to be, available for free through the federal government and through the consumers’ student loan servicers.
The U.S. Department of Education (DOE) offers a number of programs to help student borrowers who have difficulty paying back their federal student loans, including income-based repayment programs and other loan forgiveness programs free of charge.
According to the lawsuit, Equitable partnered with the other defendants to trick student loan borrowers into paying fees and high interest rates for free services. The company specifically financed the purchase price of these virtually worthless student loan debt relief services by misleading consumers and unlawfully charging them a 20.99% interest rate — a rate significantly above the New York civil usury rate cap of 16%.
As part of today’s consent order and judgment, Equitable must stop collecting on debt purportedly “owed” to the company by New Yorkers who purchased student loan debt relief services that involved Equitable’s financing — currently totaling more than $950,000. Equitable will also be permanently banned from financing the purchase of any debt relief service or product in New York.
Additionally, the settlement holds Equitable responsible for the $1.66 million the company collected from New York residents for student loan debt relief purchases. Equitable will be required to pay the State of New York $225,000 of that $1.66 million within 60 days, otherwise it will be required to pay the remaining balance of the judgment in full.
Finally, Equitable will be required to send affected consumers a notice explaining the nature and amount of the purported debt they previously owed to the company, which will now be wiped clean. Equitable will also notify consumers that it will stop collecting on that debt, and, where applicable, request the deletion of the debt from borrowers’ credit reports. The notice will additionally alert consumers if they need to take certain steps to re-certify their eligibility for their loan payment assistance program.
Affected consumers are encouraged to contact their student loan servicer and consult the U.S. Department of Education’s website or the National Consumer Law Center’s Student Loan Borrowers Assistance Project to determine whether they need to take any action to remain in any student loan repayment plan or to stay on track for any loan forgiveness program. New York residents who are eligible for restitution need not take additional steps to receive restitution.
The consent order and judgment settling the lawsuit is subject to court approval.
The Office of the New York State Attorney General continues to vigorously pursue its claims against the remaining 11 defendants that it initially filed suit against in September 2018.
Consumers who have complaints concerning student loan debt relief services may file a complaint online through the New York Attorney General’s website or by calling (800) 771-7755 to have a complaint form sent via postal mail.
This case was handled by Assistant Attorneys General Melvin Goldberg, Stewart Dearing, and Elizabeth M. Lynch of the Consumer Frauds and Protection Bureau, under the Supervision of Deputy Bureau Chief Laura J. Levine and Bureau Chief Jane M. Azia. The Consumer Frauds and Protection Bureau is a bureau of the Division of Economic Justice, which is overseen by Chief Deputy Attorney General for Economic Justice Christopher D’Angelo.