AG Ferguson surpasses $1 million in student-borrower recoveries

AG initiative to protect student borrowers includes bipartisan Student Loan Transparency Act

OLYMPIA — Attorney General Bob Ferguson announced today that his office has recovered more than $1.2 million in the last year cracking down on student loan debt adjusters who prey on borrowers. Ferguson also announced the introduction of bipartisan legislation to provide more transparency to students about their borrowing.

Since November 2015, Ferguson has brought lawsuits or resolved allegations against 15 out-of-state student loan adjusters for violating Washington’s Debt Adjustment Act and Consumer Protection Act by charging illegal fees for debt adjusting and ignoring legal obligations to inform customers of important rights. As a result of Ferguson’s actions, these companies no longer conduct business in Washington.

For example, under Washington’s Debt Adjustment Act, the maximum upfront fee a debt adjuster may legally charge is $25. The companies investigated by Ferguson’s office, however, typically charged upfront fees of $200-$1,000. Borrowers were also charged monthly “monitoring” fees in excess of the legal limit, and without a clear understanding that these fees would continue for the life of the loan.

These companies also often:

• Falsely claimed an affiliation with the federal Department of Education
• Aggressively marketed “student loan forgiveness” despite the fact that most debtors were not eligible for forgiveness
• Claimed to be student loan “experts” despite the fact that the employees had no experience in the industry
• Claimed to be able to expedite the consolidation process despite the fact that they had no ability to do so

The cases have returned an average of nearly $800 each to more than 1,600 Washington student borrowers of federally backed loans. Each student received or will receive a full refund of the fees they paid to the debt adjusters.

Student loan debt adjustment firms offer to help students complete and submit paperwork to the U.S. Department of Education to consolidate their federal student loans. But information about repayment options and help consolidating federal student loans is available — for free — directly from the U.S. Department of Education.  Borrowers can also contact the company to which they currently make payments for information about consolidation and repayment options like income-based repayment.

“Thousands of Washingtonians are overburdened with student debt,” Ferguson said. “These firms unfairly preyed on students who sought help managing their loans.”

Attorney General’s student loan initiative

The debt-adjustment enforcement efforts are part of the Attorney General’s larger focus on protecting student borrowers. These borrowers are often confounded by confusing or difficult to find information — but there is no shortage of scammers out to take advantage of them.

As part of a broad initiative, Ferguson also proposed bipartisan, agency-request legislation to mandate clear debt information for student borrowers in Washington.

“Student loan borrowers and their families need clear and accurate information to navigate an often confusing process that often leaves them indebted for decades. This legislation will help address these challenges,” Ferguson said.

Modeled after legislation in Indiana, Wisconsin and Nebraska, Ferguson’s proposed Student Loan Transparency Act requires colleges and other institutions of higher education to provide notices to students detailing their loan balances and estimated monthly payments within 30 days of the disbursement of the loan.

The Indiana Legislature passed its law after the demonstrated success of transparency efforts in that state. During the 2012-13 academic year, Indiana University sent annual loan statements to students. In the wake of this and other financial literacy initiatives, the school saw undergraduate borrowing decline by almost 16 percent over two years.

Ferguson’s Student Loan Transparency Act is sponsored by Sen. Barbara Bailey, R-Oak Harbor, as Senate Bill 5022, and Rep. Tina Orwall, D-Des Moines, under House Bill 1057.

“Student borrowers deserve clear, concise information on their loan debt, and this bill gives it to them,” Sen. Bailey said. “That knowledge is key to making smart decisions as students navigate their scholastic careers.”

“Most students lack even basic information about their loans, and many of them underestimate how much debt they already have,” Rep. Orwall added. “The basic information in this bill gives students the tools they need to make informed choices to better plan for their future, which could be the difference between manageable debt and graduates who are buried by their loans.”

Attorney General Ferguson is committed to standing up for students by cracking down on predatory for-profit colleges, ensuring loan-servicing and debt-adjusting companies play by the rules, and promoting legislation to protect consumers. More information on the office’s student loan work is available here.

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The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Visit www.atg.wa.gov to learn more.

Contacts:

Peter Lavallee, Communications Director, (360) 586-0725; PeterL@atg.wa.gov