Then she heard a radio ad from a debt-settlement company. The firm told her it could reduce her payments by
"I was excited because of the possibility of creating a situation where I could free up some additional money -- who wouldn't be excited about that?" said Brown, 42, who racked up more than
But she became cautious after the firm,
"If it sounds too good to be true, it probably is," she said.
When she called the
On Monday, Madigan filed two lawsuits against debt-settlement firms that she claimed perpetrated "scams" against consumers, making
Student loans are the biggest source of consumer debt after mortgages. Outstanding student loan balances reported on credit reports rose to
One of the suits, against
Broadsword and First American Tax, which was founded in 2012, could not be reached for comment. The lawsuits allege that they violated consumer-fraud and debt-settlement acts.
The suit against First American Tax cited the experiences of three
Cibelli was told that First American Tax was affiliated with the government and asked him to pay
That same day, he called the
Despite the complaints, First American Tax wouldn't issue a refund, though Cibelli successfully disputed the charge with his credit card company, the lawsuit said.
Madigan said First American Tax isn't affiliated with
First American Tax advertises a range of student-loan relief services, including the ability to negotiate lower monthly payments, remove wage garnishments and get loans out of default, Madigan's lawsuit said. But First American Tax lacks a license to offer and execute contracts with
The lawsuit alleged that First American Tax does little more than complete applications that are already available for free to federal borrowers from the
Federal student loans include a consolidation option that allows borrowers to combine outstanding loans into a single one, simplifying repayment, the lawsuit against First American Tax said. That might help borrowers access alternative repayment plans, convert from variable interest to fixed rate, and to modify monthly repayment amounts.
Borrowers may apply to consolidate their federal student debt into a direct consolidation loan by submitting an application to the
The application, and help to complete the process, is available from the department at no cost, Madigan said in her lawsuit against First American Tax.
First American Tax, since at least
"Defendants do not have such capabilities," the lawsuit said. The company doesn't explain that lower monthly payments can lead to longer student loan maturity periods, causing consumers to pay more in interest ultimately.
First American Tax, to create a false sense of security, falsely claimed an affiliation with the government, the suit said. It also said its staff included "attorneys," when, in fact, it has only one licensed in
Madigan said current and former students should never pay upfront for help with student loans. Sources for help include the
Since issuing her complaint against Broadsword, Brown has reduced her student loan payment to
The new payment amount is more manageable, Brown said -- she doesn't feel anxious and frustrated as she did before. Now she hopes she can cure her back pain and stomach ailment. Though she works full time, she's on limited duty because of her health problems.
"I'd love to be back on full-duty," she said. "I love policing."
The lawsuits ask the firms to stop engaging in deceptive practices, and they ask for civil penalties and restitution.
Tips for people struggling with student-loan debt:
--Never pay for information on how to pay back student loans, warns
--A step-by-step tip sheet is available at tinyurl.com/o975ce3.
--If you feel you are a victim of fraud, call Madigan's office at 800-386-5438.
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