Federal regulators have halted student debt-relief programs offered by three Orange County businesses that allegedly bilked students out of more than $12 million.
Complaints filed April 24 in U.S. District Court in Santa Ana by the Federal Trade Commission target SL Finance LLC, BCO Consulting Services Inc. and SLA Consulting Services Inc, alleging the companies used deceptive claims about repayment programs and loan forgiveness that didn’t exist.
The actions were filed under the Federal Trade Commission Act and Telemarketing and Consumer Fraud and Abuse Prevention Act, among other legal protections.
The FTC said the companies falsely claimed to be or be affiliated with the Department of Education, telling students the illegal payments would count toward their loans. The court has temporarily halted the schemes and frozen the assets of the three companies.
Representatives with the businesses could not be reached for comment Monday, May 8.
Samuel Levine, director of the agency’s Bureau of Consumer Protection, said fraudsters have descended on students in dire need of financial relief.
“As Americans struggle with massive student loan debt and uncertainty around the prospect of forgiveness, scammers are looking to cash in,” Levine said in a statement. “These lawsuits to shut down student loan debt-relief schemes continue the agency’s crackdown on junk fees, unwanted calls and financial exploitation.”
The FTC complaint against Garden Grove-based SL Finance and owners Michael and Christian Castillo alleges the company lured students — many of whom are low-income borrowers saddled with tens of thousands of dollars of student debt — into paying hundreds of dollars in exchange for false promises of loan forgiveness.
The agency said the company failed “to seek or deliver loan forgiveness, loan repayment plans or even a reduced loan balance.” And when students realized they were duped and asked for a refund, SL Finance often refused.
The federal agency said the scheme relies heavily on false and misleading representations, often made during an initial call between a telemarketer and a customer. Students were frequently told the debt-relief programs were part of the federal CARES Act or other COVID-19 relief programs created by the government.
The complaint against SL Finance alleges that since May 14, 2019, the company collected hundreds of dollars per student from thousands of students for a total of around $6 million.
Once in possession of their private and sensitive financial information, SL Finance typically collected five “initial” monthly payments of about $200, sometimes followed by monthly payments of approximately $39, the action says.
The FTC complaint against BCO Consulting Services in Placentia and SLA Consulting Services in Santa Ana also names owners Gianni Olilang, Brandon Clores, Kishan Bhakta and Allan Radam.
The complaint contends those companies used the same kinds of violations cited in the SL Finance complaint. It claims that since at least August 2019, BCO and SLA have collected hundreds of dollars per student from thousands of students totaling at least $6.5 million.
The complaints seek permanent injunctions against all three companies and monetary relief for those who were misled by the debt-relief schemes, along with any additional relief the court deems just.
Student loan debt is the second largest class of consumer debt in the United States, with more than 45 million borrowers owing an estimated $1.75 trillion. It’s also one of the most distressed classes of debt, with about $110.5 billion of student loans in default.
President Joe Biden is pushing a student loan debt-relief program that would provide up to $20,000 in debt relief to Pell Grant recipients with loans held by the Department of Education and up to $10,000 in debt relief to non-Pell Grant recipients.
The plan has come under attack by Republicans who say it provides an “unfair” advantage to people who still held debt over others who had paid theirs off already or decided to forgo college altogether.
In hearing two cases challenging the plan, the Republican-appointed majority on the Supreme Court seemed likely to block Biden’s plan.
The Associated Press contributed to this report.