FTC Acts to Stop Student Loan Debt Relief Scheme that Took Millions from Consumers in First Case under the Impersonation Rule

In its first case under the Impersonation Rule, the Federal Trade Commission has stopped a student loan debt relief scheme that bilked more than $20.3 million from consumers seeking debt relief by pretending to be affiliated with the Department of Education.

A federal court temporarily halted the scheme and froze its assets - at the request of the FTC, which seeks to end the defendants' deceptive practices. The FTC charged that the company also falsely claimed that they would take over consumers' student loans to get them loan forgiveness that did not exist.

"These defendants promised to lower student loan payments, but then took millions of dollars from consumers and did nothing, leaving them in deeper debt," said Samuel Levine, Director of FTC's Bureau of Consumer Protection. "The FTC will continue taking decisive action against those who exploit Americans struggling with student debt."

According to the FTC's complaint, since at least June 2021, California-based Panda Benefit Services (also doing business as Prosperity Benefit Services), Clarity Support Services, Pacific Quest Services, Prosperity Loan Services, Public Processing Services, Quick Start Services, Select Student Services, Signature Processing Services, and its operators Christopher Hanson, Eduardo Martinez, Emiliano Salinas, and Melissa Salinas, preyed on consumers burdened with student loan debt and tricked them into paying hundreds to thousands of dollars in illegal junk fees towards loan forgiveness that did not exist.

The FTC says that Prosperity Benefit Services, its affiliated companies, and operators falsely claimed that consumers who paid for their program were guaranteed to receive loan forgiveness and that the program would significantly reduce their loan payments. The operators also falsely claimed to take over the servicing of consumers' student loans and told consumers that they were affiliated with the Department of Education.

The complaint notes that in many instances, the operators would send mailers with urgent language like "FINAL NOTICE" and "Time Sensitive," and boasted benefits like "complete loan forgiveness" and "tax free loan forgiveness" to entice consumers to call them and speak to a telemarketer. When consumers called the number on the mailers, they would speak with telemarketers who then convinced them that if they signed up for the debt relief program, they would be eligible for loan forgiveness after only a few months or years, a substantially shorter time than what is available under federal government repayment programs. Many consumers have reported that after signing up and making payments, they never received loan forgiveness and that the scheme's operators never applied for loan forgiveness on their behalf.

In addition, the operators of the scheme falsely claimed that they would take over consumers' loans and claimed that they buy their loans from consumers' federal servicers. By falsely claiming they worked with or were affiliated with the Department of Education, the scheme's operators were able to obtain consumers' bank account or debit card information, and typically collect hundreds of dollars in illegal upfront fees from consumers, according to the FTC.

Contrary to their promises, in many instances the operators did not obtain loan forgiveness or lower payments for consumers, and because borrowers of federal student loans were not required to make payments on their loans between March 2020 and October 2023 due to the federal COVID-19 payment pause, many consumers have often gone months or years before finding out that their student loan payments were not lowered and that their loans had not been forgiven.

The Impersonation Rule, which went into effect April 1, gives the agency stronger tools to combat and deter scammers who impersonate government agencies, such as the Department of Education, and businesses, enabling the FTC to file federal court cases seeking to get money back to injured consumers and civil penalties against rule violators. In addition to the Impersonation Rule, the agency says the defendants also violated the FTC Act, the Telemarketing Sales Rule, and the Gramm-Leach-Bliley Act.

The Commission vote authorizing the staff to file the complaint was 5-0. The U.S. District Court for the Central District of California entered a temporary restraining order on June 24, 2024.

NOTE: The Commission files a complaint when it has "reason to believe" that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

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