A Santa Ana company will pay at least $835,000 to settle allegations from the federal government it operated a student debt loan scheme that charged illegal upfront fees and made false promises to customers.
The settlement, finalized earlier this month, resolves a 2019 lawsuit filed by the Federal Trade Commission against Arete Financial Group, Carey G. Howe, Anna C. Howe, Shunmin Hsu, Ruddy Palacios and Oliver Pomazi, as well as several related companies.
Carey Howe, president of Arete Financial, could not be reached for comment Tuesday regarding the settlement. However, he has denied the FTC allegations in court documents.
The five defendants named in the FTC lawsuit allegedly pocketed at least $43 million since 2014 as a result of the student loan scheme.
In November 2019, a federal judge froze Arete Financial’s assets. Six months later, the company received a federal Paycheck Protection Program loan of up to $1 million to weather the economic impact of the COVID-19 pandemic, according to the U.S. Small Business Administration.
“Defendants have operated an unlawful debt relief scheme that preys on consumers with student loan debt,” the complaint states. “Defendants promise consumers that, in exchange for the payment of an upfront fee and subsequent monthly fees, defendants will reduce consumers’ monthly student loan payments or eliminate all, or a substantial portion of, their federal student loan debt by enrolling consumers in student loan forgiveness, consolidation, or repayment programs.”
In many instances, the FTC said it found the defendants failed to reduce or eliminate customers’ loan balances or monthly loan payments. The lawsuit also alleges the defendants broke promises that monthly fee payments would be applied toward student loans.
“As a result, consumers who already struggle to pay their student loans lose even more money to defendants,” the lawsuit says.
Arete Financial used radio, television and internet advertisements as well as unsolicited telemarketing calls to prey on consumers around the country with student loan debt, the suit alleged. The defendants allegedly charged illegal upfront fees ranging from $500 to $1,800.
Instead of delivering on promised benefits, the defendants often merely contacted the consumer’s lender to place student loans into temporary forbearance or deferment status without the consumer’s authorization or knowledge, the lawsuit says. That temporarily relieved consumers of monthly payments, but allowed interest to accrue that was added to the principal balance of the loans, according to the complaint.
The order bans the defendants from providing student loan debt relief services, prohibits them from violating the Telemarketing Sales Rule, and includes a monetary judgment of $43.3 million, which is partially suspended due to their inability to pay, the FTC said.
The $835,000 settlement and additional assets will be used to compensate consumers allegedly victimized by the scheme.
“Arete Financial Group charged illegal upfront fees and made false promises to consumers struggling with student loan debt,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said in a statement. “To avoid scams like these, consumers should never pay an advance fee to a company promising to deliver debt relief.”
Source: Orange County Register
Be First to Comment