ICYMI: Congress cracks down on student debt scams
WASHINGTON, D.C., December 9, 2020
On Monday, the House passed S. 1153, the Stop Student Debt Relief Scams Act, a bipartisan, bicameral bill that will crack down on third-party debt collection scammers who exploit vulnerable students.
Over 40 million Americans owe $1.5 trillion in federal student loan debt. Hundreds of malicious third-party debt collection companies are selling students on the notion that their company will reduce or make the student’s loan debt disappear.
The scammers trick borrowers into paying an exorbitant fee for a service that is already available for free. Victims of the scheme usually become delinquent and enter default as a result.
The Stop Student Debt Relief Scams Act will help federal and state officials take action against these debt collection scammers.
This bill clarifies it is a federal crime to access Department of Education information technology systems for fraud, commercial advantage, or private financial gain, and penalizes scammers with a fine of up to $20,000, imprisonment up to a five-year sentence, or a combination of both.
Further, the legislation improves student loan exit counseling by warning federal loan borrowers about debt relief scams and informing them that these third-party companies charge money for services provided to borrowers for free by the Department of Education.
And importantly, this legislation requires the Department of Education to maintain common-sense reporting, detection, and prevention activities to stop potential or known debt relief scams.
In case you missed it, Politico covered the bill’s passage:
Congress cracks down on student debt scams
By Michael Stratford
December 7, 2020
The House cleared a bipartisan bill Monday aimed at cracking down on debt relief scams that target federal student loan borrowers, sending the legislation to President Donald Trump’s desk.
House lawmakers passed the bill, S. 1153 (116), by voice vote under suspension of the rules. The Senate cleared the measure last week by unanimous consent...
Key context: Federal regulators have increasingly raised alarms in recent years about the growing threat of debt relief scams that target federal student loan borrowers. In some cases, the companies charge borrowers to access benefits and services the Education Department provides for free.
Consumer advocacy organizations and student loan industry groups backed the bill.
Read the full story here.