NYLAG and Quinn Emanuel Urquhart & Sullivan LLC (“Quinn Emanuel”), filed a class action complaint last Friday against Equitable Acceptance Corporation (“EAC”) and more than 40 other companies alleging that defendants engaged in a coordinated fraudulent scheme to sell scam debt relief services to tens of thousands of federal student loan borrowers. The complaint alleges that EAC and the companies it works with lure struggling federal student borrowers with promises of loan “forgiveness” that they cannot and do not offer. Instead, Defendants saddle the borrowers with a new, unnecessary loan on deceptive terms and at usurious rates.

The complaint, filed in the United States District Court for the Southern District of New York, alleges that EAC directed the dozens of companies it works with (“dealers”) to sell purported student loan assistance services to federal student loan borrowers for $1,300. Dealers solicit borrowers by cold-calling them and making a variety of misrepresentations, including that they will obtain “forgiveness” for borrowers. The Dealers do not tell borrowers that all the services they provide are already available for free through the federal government, or that the services provided often raise the borrowers’ interest rates, balances, repayment terms, or all of the above. The Dealers purport to offer the borrowers the option to pay the $1,300 fee through a “payment plan”—steering them to the second part of defendants’ fraudulent scheme. The “payment plan” offered by the Dealers is, in reality, an entirely new loan from EAC in the form of a maxed-out line of credit—with sky-high 21% interest. Despite hundreds of complaints with the Better Business Bureau and the Consumer Financial Protection Bureau, EAC and its dealers have continued their practices unabated.

Vanessa Williams, one of the plaintiffs named in the complaint, was drowning in debt after getting her bachelors’ degree. When one of EAC’s affiliates offered her forgiveness of tens of thousands of dollars of loans for only $49 per month, she jumped at the chance. But she later learned that the company had defrauded her and had left her not only with her full loans at a higher-interest rate but a new debt to Equitable Acceptance.

Plaintiffs seek relief under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), the Truth in Lending Act (“TILA”), the Computer Fraud and Abuse Act (“CFAA”) and New York State law. “Defendants’ victims are among the millions of vulnerable student loan borrowers already struggling to make ends meet,” said Danielle Tarantolo, Co-Director of NYLAG’s Special Litigation Unit. “Defendants’ coordinated scheme targets these individuals to sell them fraudulent services that push the borrowers into even greater debt while diverting their money into Defendants’ pockets.” The complaint seeks compensatory damages and injunctive relief for the class of 60,000 student loan borrowers.

NYLAG has set up a hotline to assist affected student loan borrowers. The number is (212) 659-6165.