For the first time a state regulator is suing debt settlement companies that allegedly take advantage of student loan borrowers.
Illinois Attorney General Lisa Madigan filed two lawsuits on Monday: one against Broadsword Student Advantage, based in Texas, and the other against First American Tax Defense, based in Illinois. The suits allege that the unlicensed businesses charged borrowers as much as $1,200 for “bogus services” to help lower or eliminate their monthly payments to creditors, according to a release from Madigan’s office.
Some 40 million Americans shoulder a record-level $1.2 trillion in student debt, at a time when the job market has struggled to make a comeback from the financial crisis of 2008. “It’s just, unfortunately, the latest scam on the largest group of people who are struggling with the most debt,” Madigan told the New York Times.
Madigan contends that the companies charge for government services that are actually free for borrowers, and “specifically offer public service employees a loan debt forgiveness program for which the companies could not qualify them,” her office stated. The lawsuit against First American also alleges that the company advertises a so-called “Obama forgiveness program” that does not exist.
First American could not be reached immediately for comment. A representative for Broadsword told the International Business Times that “at this time we do not have a statement.”