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New York’s Student Protection Unit Announces Closure of Debt Relief Provider

Just last week, I wrote about LegalZoom’s offer to help sign student debtors onto the federal government’s income-based repayment scheme, even though the process is meant to be done by debtors themselves for free. There were two points from that post: One was that LegalZoom might not be the usurper of traditional legal services as it’s portrayed, and two, LegalZoom sure looks a lot like other controversial student debt relief companies that charge high upfront fees.

In fact, New York’s own Student Protection Unit, a division in the Department of Financial Services, announced on July 1st that one such student debt relief company was shutting its doors thanks to the unit’s investigation. Governor Cuomo created the Student Protection Unit in early 2014, and it promptly subpoenaed thirteen debt relief companies to investigate whether they were engaging in improper behavior.

According to the Student Protection Unit, the debt relief provider in question, Interactiv Education, also referred to as Direct Student Aid, used “misleading and deceptive advertising, and other improper practices.” The unit discovered that Direct Student Aid charged upfront fees ranging from $99 to $3,400. It also failed to disclose to customers that they could obtain the same services, consolidation of federal student loans and access to income-sensitive repayment programs, for free from the government. These actions violate state and federal law.

But that’s not all: Direct Student Aid also charged people for improving their credit scores without providing the legally required disclosures. As a result of these violations, it paid New York $10,000 and promised to cease its operations. It’s a big win for New York debtors, though it’s unclear whether they’ll get a refund.

The Student Protection Unit’s press release on Direct Student Aid can be found here.

For those concerned about LegalZoom, it’s unlikely to be held accountable as Direct Student Aid has because it most likely is complying (or at least improving its compliance) with federal and state laws.

If you have significant amounts of student loan debt, or other debts, then chances are you can sign onto a federal loan repayment program on your own. However, talking to an experienced bankruptcy lawyer is usually free of charge. Bankruptcy benefits student debtors most by discharging other debts to free income for student loans.

For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn NY foreclosure attorneys Bruce Weiner for a free initial consultation.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

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