You Can’t Just Make Up Words

At least not without going through the proper channels. [thanks to www.marriedtothesea.com]

Busting the Fraudulent Student Loan Scam

Occasionally a project will surface that’s a ‘perfect storm’ of interesting stuff: it’s got education, politics, consumer advocacy, finance, evil-doing, justice, et. al. wrapped up in the same burrito.

One of my pro bono clients is a very bright, motivated girl with a full-time career and a desire to earn at least a Bachelor’s degree. She decided to spend a year working and going to a Community College to gauge her interest and ability to juggle the two. We chose her classes based on her background and, most importantly, the quality of offerings by the College. She finished with a 4.0 last semester and was accepted into the Honors Program for the Spring.

One has to fund one’s education - and that includes the logistical pieces that make it possible. Our student needed a reliable car to get her between home, work and class. Though eligible for Federal financial aid and having work-sponsored tuition reimbursement (90%), neither covered her school-related/living expenses [nota bene: given her timing and circumstances]. She applied for several student loans and eventually brought to me a promissory note to look over.

The loan company - hereafter referred to as the “Company” due to legal concerns - called and asked for a collateral payment of roughly 7% of the total value of the loan. That’s warning sign #1 - demanding a collateral payment over the phone before the release of a loan is illegal as per the Federal Telemarketer’s Act. Research showed plenty of other improprieties:

• The Company’s website didn’t list a telephone number. If a company can’t be contacted easily, avoid them. The reasons for poor communication range from ignorance/inexperience to outright malice; neither is good.
• The Company made no references to being licensed/regulated by any appropriate body or agency. Organizations of all types - from businesses to universities - are proud of their professional associations. In our case, a company needs to be licensed to conduct consumer lending in the consumer’s state of residence. If this information isn’t available anywhere on the lender’s website or in their terms/agreements, avoid them. If you can’t find it, call a representative and ask. Their response will be indicative of their credibility.
• An internet search yielded little information. Established companies should show up when you attempt basic research, either in support of their services or against. If a company’s history is negative or unclear, choose another. A check with the Better Business Bureau also yielded no results. While not every company is registered with the BBB, the more reputable ones are.
• The Company’s website was registered in February, 2007 - and only registered through February, 2008. A consumer lending group that didn’t have a domain name prior to three weeks before your loan approval - and doesn’t have any interest in holding the domain in the long-term? Avoid it. This is a hallmark of a scam. And even if it isn’t, you don’t want to make an agreement with a financial institution that waited until 2007 to start utilizing the internet.
• Assorted red flags: their registration page was copied from their webhost’s site; they had the same application for all lending, from mortgages to student loans; inconsistent information in phone conversations with customer service, etc.

If any one of these warnings presents itself, avoid the company. If you see more than one, it’s time to register a complaint. Start with the local authorities from the area in which the company claims to operate. Be proactive with this - your actions will save many people thousands of dollars.

After obtaining the client’s consent, I contacted the local police. Stay tuned.