Photo: Richard Drew, AP
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ALBANY — A company that conned more than 4,000 New Yorkers into paying hefty fees for student loan relief services offered for free by the federal government has settled with the state Attorney General’s office.
Equitable Acceptance Corporation — which along with 11 similar loan refinancing companies was sued by the Attorney General last September — has agreed to erase any debt associated with fees for its college loan relief scheme and will cease operating in New York, according to an agreement announced Thursday.
“Higher education is supposed to be a gateway to prosperity, not a trapdoor to financial ruin,” state Attorney General Letitia James said Thursday. “Equitable scammed students by offering worthless services that were available at no cost.”
The U.S. Department of Education (DOE) offers a number of programs to help student borrowers who have difficulty paying back their federal student loans, including income-based repayment programs and other loan forgiveness programs free of charge and it is illegal to charge upfront fees for these services, the complaint notes.
The companies targeted borrowers in ads on social media and on the radio, convincing them to pay over $1,000 for these free services, according to James.
Equitable partnered with the other defendants to trick student loan borrowers into paying fees and high interest rates for free services, according to the suit. The company financed the purchase price of the virtually worthless student loan debt relief services by misleading consumers and unlawfully charging them a 20.99 percent interest rate — a rate significantly above the New York civil usury rate cap of 16 percent.
Equitable has been barred from collecting on debt purportedly “owed” to the company by New Yorkers for financing, an amount totaling more than $950,000. Equitable will also be permanently banned from financing the purchase of any debt relief service or product in New York.
The company is ordered to pay back $1.66 million it collected from New Yorkers for student loan debt relief purchases. Equitable must pay the state $225,000 of that $1.66 million within 60 days, or it will be required to pay the remaining balance of the judgment in full.
Equitable will also be required to send affected consumers a notice explaining the nature and amount of the purported debt they previously owed to the company, which will now be wiped clean. The company will notify consumers that it will stop collecting on that debt, and when necessary, request the deletion of the debt from borrowers’ credit reports.
The notice will let consumers know if they need to take steps to re-certify their eligibility for their loan payment assistance program.
Affected consumers are encouraged to contact their student loan servicer and consult the U.S. Department of Education’s website or the National Consumer Law Center’s Student Loan Borrowers Assistance Project to determine whether they need to take any action to remain in any student loan repayment plan or to stay on track for any loan forgiveness program. New York residents who are eligible for restitution need not take additional steps to receive restitution.
The settlement is subject to court approval. James’ office continues to pursue its claims against the remaining 11 loan refinancing companies.