The head of a nationwide fraud ring that claimed to be a student loan debt relief program was arrested in Orange County, the California Attorney General’s Office announced Tuesday.
Attorney General Rob Bonta said the defendant owned and operated a multimillion-dollar network of third-party debt relief businesses based in the O.C.
Each victim of the scheme paid or was scheduled to pay upfront fees and monthly amounts of more than $1,000 to the fraudulent debt relief business. Most believed the payments were being applied to their overall loan balance when, in fact, they were filling the pockets of the schemers.
“They employed managers and sales agents to operate multiple call centers that contacted individuals across the country promising to reduce or eliminate their federal student loan debt,” the AG’s office said in a statement.
“Instead, the owner, as well as four call center managers and two sales agents allegedly stole over $6,130,000 in less than three years from over 19,000 victims, including 3,000 in California.”
All defendants arrested for their alleged connection to the scheme face multiple counts, including grand theft by false pretenses, computer access and fraud and unauthorized use of personal identifying information.
The lead defendant, who the AG’s office has not named, was charged with all 87 counts of the indictment. In addition, they will face special allegations for money laundering of more than $2.5 million and aggravated white-collar crime.
“All of the work of the entire team, including O.C. Sheriff’s investigators, is well worth the effort to provide justice for unsuspecting students who thought they were paying off student loans,” said Orange County Sheriff-Coroner Don Barnes.
“While it’s an unfortunate reality, scammers will take advantage of victims for their personal financial gain.The best defense against these scams is to be informed about different types of fraud and how you can avoid becoming a victim.”
An estimated 380,000 student loan borrowers were contacted by agents with the third-party debt relief businesses between 2017 and 2020, according to the investigation. All were struggling to meet their monthly obligations when they were preyed upon by the call centers.
The investigation found that the callers pretended to be associated with the U.S. Department of Education and told the borrowers that they could guarantee enrollment in programs that would lower their monthly payments and result in loan forgiveness.
The call centers ultimately got personal information from the borrowers and “used that information to access and make changes to borrowers’ Federal Student Aid (FSA) accounts without consent.”
The AG’s office said the scam resulted in loss of money, late payments on existing student loan accounts, increased loan balances and, in some cases, the defaulting of student loans.
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