New York Gov. Andrew Cuomo today announced an investigation into concerns about “potentially misleading” advertising, “improper” fees, and other consumer-protection problems in the student debt-relief industry.
Cuomo’s newly established student-protection unit has issued subpoenas to 13 student debt-relief companies, his office said in a news release.
In particular, the Department of Financial Services’ (DFS) Student Protection Unit is probing concerns that the industry is charging “high, improper fees” without adequate notice for enrolling students in debt-relief programs, the governor’s office.
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Those same programs are available free of charge through the federal government, according to Cuomo’s office.
The unit issued subpoenas to 13 firms that include AlphaOne Student LLC, which a Google search indicates is based in Arizona; Student Consulting Group, Inc., which is based in Atlanta; and Xtreme Products LLC, which does business as USA Student Loans and is based in Jacksonville, Fla., according to Cuomo’s office.
As part of his 2014-15 budget proposal, Cuomo launched a new student-protection unit within DFS to serve as a consumer watchdog for New York’s students. The DFS Student-Protection Unit is dedicated to investigating potential consumer-protection violations and distributing “clear” information that students can use to help them make “smart, long-term” financial choices, Cuomo’s office said.
“Socking students with high fees for a service that is already available for free through the federal government is an immediate red flag,” Benjamin Lawsky, superintendent of financial services, said in the news release.
Student debt-relief companies typically charge students fees to assist them with consolidating multiple student loans into a single loan.
However, the same programs that these companies advertise are often available to borrowers free of charge through the U.S. Department of Education.
Cuomo’s office cites concerns about whether these private companies are charging “improper, high upfront” fees for simply funneling students into free government programs.
A recent report from the National Consumer Law Center (NCLC) detailed these and other troubling practices within this industry, Cuomo’s office said.
The Boston–based NCLC is a nonprofit that uses “its expertise in consumer law and energy policy to work for consumer justice and economic security for low-income and other disadvantaged people,” according to its website.
Contact Reinhardt at ereinhardt@cnybj.com
