Attorney General Ellison shuts down fraudulent student-loan debt-settlement company
California-based company offering fraudulent ‘forgiveness’ scheme will pay State $20K to refund Minnesota customers; marks 13th time AGO has shut down fraudulent student-loan debt-relief company in Minnesota
February 14, 2023 (SAINT PAUL) — Minnesota Attorney General Keith Ellison announced today that his office has obtained a settlement that requires a California student-loan debt-relief company that illegally collected fees from customers and misrepresented its services to consumers to cease operating in Minnesota and provide full refunds to its Minnesota consumers.
Among other things, Direct Account Management — a company based in Laguna Niguel, California — is alleged to have falsely promised consumers student-loan forgiveness, when only the federal government can forgive federal student loans. The Attorney General alleges that the company — which sometimes used the name Student Loan Advisory when speaking with consumers — pocketed exorbitant fees to enroll consumers in federal repayment programs that consumers can enroll themselves in for free. It also charged up-front fees before performing the promised services, which is illegal under Minnesota law regulating debt-settlement services. Additionally, Direct Account Management was operating without registering as a debt-settlement service provider, as required by Minnesota law.
The settlement, filed in Ramsey County District Court, requires Direct Account Management to immediately pay the State $20,063.12 — the full amount it has collected from Minnesota customers — which the Attorney General’s Office will use to provide full restitution to consumers. The settlement also requires Direct Account Management to cease operating in Minnesota unless and until it registers as a debt-settlement service provider. Attorney General Ellison’s Office alleges in the settlement that Direct Account Management violated Minnesota’s Debt Services Settlement Act, Prevention of Consumer Fraud Act, and Uniform Deceptive Trade Practices Act.
“Minnesotans take out student loans in good faith so they can get educations that will help them better afford their lives. My office is showing once again that when companies take advantage of that good faith to rip Minnesotans off, we will come after them,” Attorney General Ellison said. “I encourage any Minnesotan who’s been preyed upon by this company or others like it to contact my office so we can hold these bad actors accountable.”
Student-loan debt-relief companies often charge consumers hundreds or thousands of dollars of illegal upfront fees to enroll them in repayment plans or consolidation loans—which are sometimes unnecessary or inappropriate for the consumers—that all eligible federal student-loan borrowers can apply for on their own for free through the United States Department of Education. Often, these companies deceive consumers into believing that the fees will go toward paying down the consumers’ student-loan debt, when the companies actually pocket the fees.
This settlement marks the 13th time the Minnesota Attorney General’s office has shut down a fraudulent student-loan debt-relief company in Minnesota, following others in April 2016, July 2016, October 2016, February 2018, September 2019, October 2019, April 2020, September 2020, January 2021, April 2021, October 2022, and November 2022. In total, the Minnesota Attorney General’s Office has recovered and returned more than $1.4 million to Minnesota consumers victimized by fraudulent student loan debt settlement companies.
Attorney General Ellison encourages anyone who has been victimized by Direct Account Management to contact the Minnesota Attorney General’s Office by calling (651) 296-3353 (Metro area) or (800) 657-3787 (Greater Minnesota), or by filing a complaint online.
The Attorney General’s Office encourages borrowers to visit its website for additional information on how to avoid student-loan scams, including a publication entitled Student Loan Assistance Companies that Charge High Fees for What You Can Do for Free. Student-loan borrowers may access the United States Department of Education’s website — https://studentaid.gov/manage-loans/repayment/plans — for additional information about federal student-loan repayment programs available to all eligible borrowers for free.