The Federal Trade Commission (FTC) shut down three debt reduction companies in Florida for scamming people out of close to $2.4 million. Despite such a large fine, the three companies are only paying up $4,500 total, accounting for their total assets.
In late January, the FTC announced that it resolved an order against Chastity Valdes, a Florida resident, and her companies, Consumer Assistance LLC, Consumer Assistance Project Corp., and Palermo Global LLC, for scamming struggling student loan borrowers out of money.
According to the FTC, the defendant companies enticed student loan borrowers with promises that they could get rid of all their debt and repair their credit. These services were offered for an illegal up-front fee, and the defendants went as far as to post fake positive reviews online to scam more borrowers. The FTC action bars the defendants from providing debt and credit repair relief. While these companies are only coughing up $4,500, the FTC noted the full judgment of $2.3 million will be due immediately if it turns out that the defendants misrepresented their current financial assets.
In its original complaint, which the FTC filed in May alongside the state of Florida, the government agency alleged the scammers enticed borrowers with promises such as “Get Rid of Your Debt Today.” The scammers would pretend to determine the borrowers’ eligibility for student loan reduction programs. and then inform them that if they paid upfront their loans could be reduced by 50 to 70 percent.
The defendants said that they would audit the student loans of struggling borrowers to pinpoint any errors that would reduce their loan balance and fix their credit at the same time. These audits failed to do anything for the clients. Some cases involved $250 in upfront fees, and some scam cases involved a $303 monthly charge lasting for as long as three years.
“Consumers should be wary of any company that claims it can eliminate or greatly reduce debt, especially if they ask for money in advance,” Jessica Rich, director of the FTC’s Bureau of Consumer Protection said in the original complaint.
This isn’t the first debt reduction company that the FTC set its sights on. When the government agency provided an update to the Consumer Financial Protection Board about its enforcement actions during 2016, it listed debt reduction scams as a big target. According to the FTC last year, it led or resolved 12 cases encompassing 61 defendants and gathered close to $70 million in judgements. What’s more, it banned 44 companies and individuals from the debt relief industry forever.
LendEDU reached out to Jessica Rich for a comment, but no response has been received.
Author: Andrew Rombach
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