NEW YORK, May 22 (Reuters) - New York’s attorney general said on Friday she has settled a lawsuit against three companies accused of tricking struggling borrowers into paying more than $1,000 for student loan debt relief services that were available for free.
Attorney General Letitia James said the accord permanently bans Debt Resolve Inc, Progress Advocates LLC, Student Loan Care LLC and two of the companies’ executives, Bruce Bellmare and Stanley Freimuth, from the debt relief industry.
James said the companies also agreed to excuse outstanding consumer loans and accept a $5.5 million court judgment, but will pay just $250,000 to satisfy it because they are in bankruptcy and have a limited ability to pay.
The defendants did not admit or deny wrongdoing. Their lawyer did not immediately respond to a request for comment. The settlement requires court approval.
In the lawsuit, James accused 13 defendants of fraud and violating consumer protection laws, through such practices as promising loan forgiveness they could not deliver, and charging illegal upfront fees and excessive interest rates.
The lawsuit began in September 2018 under James’ predecessor Barbara Underwood. Twelve defendants have settled, resulting in $525,000 in restitution to consumers and more than $4 million in loan forbearance. The 13th defendant defaulted.
Student loan debt outstanding in the United States totaled about $1.68 trillion in March, according to the Federal Reserve. (Reporting by Jonathan Stempel in New York; Editing by Richard Chang)