CHICAGO (AP) — Illinois Attorney General Lisa Madigan filed lawsuits Monday against two companies she says are scamming people who are paying student loan debts.
The lawsuits, filed in Cook and Champaign counties, alleged "deceptive practices" for charging up-front fees for phony services or for services that are already free. The companies' advertisements on radio, online and signs affixed to lamp posts and fences offered student loan forgiveness or lowered payments, Madigan said.
"All of the alleged services that these operators provide, you can access yourself at no cost because they are free programs offered by the U.S. government," she said a Chicago news conference. "Too often, students do not know what options they have to repay or reduce their loan payments."
She said her office received dozens of complaints about Chicago-based First American Tax Defense LLC and Texas-based Broadsword Student Advantage LLC, and says there are likely many more people affected. Messages left at both companies Monday weren't immediately returned.
The companies allegedly charged people up to $1,200 up front for sham services. In one instance detailed in the lawsuits, First American allegedly advertised for an "Obama forgiveness program" that Madigan said isn't a government program. Broadsword circulated ads targeting professionals who are paying off loan debt, including teachers, nurses, government employees and firefighters, according to audio of the company's radio ads provided by Madigan's office.
The lawsuits alleged that the companies violate Illinois laws, including a 2010 act that bans companies from charging upfront fees for help with debt relief.
Student loan debt affects nearly 40 million Americans who have $1.2 trillion in outstanding debt, according to Madigan's office. In Illinois, student loan borrowers owe roughly $26,000 on average, according to Illinois Public Interest Research Group.
Madigan said her office will be aggressively targeting other companies that allegedly do the same. Previously, her office has sued for-profit colleges for "deceptive practices" that left numerous students with debt for degrees that failed to qualify them for certain types of jobs.
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