FTC Names Additional Defendant in Student Loan Debt Relief Case

The Federal Trade Commission has amended its complaint in a student loan debt relief case, naming an additional defendant who allegedly took part in a scam that bilked more than $23 million from thousands of consumers with false claims that it would service and pay down their student loans.

According to the FTC, Labiba Velazquez was one of the operators of Mission Hills Federal and Federal Direct Group, a student loan debt relief scheme that lured consumers into paying hundreds, if not thousands, of dollars in illegal upfront fees with false promises to lower consumers’ monthly student loan payments. The defendants also allegedly tricked consumers into submitting their monthly student loan payments directly to the defendants by falsely claiming to take over servicing the consumers’ loans. In reality, the defendants either only applied minimal payments on consumers’ loans or, in many instances, applied none of the payments to the loans, pocketing the money for themselves.

The Commission vote authorizing the staff to file the amended complaint was 5-0. The U.S. District Court for the Central District of California entered a temporary restraining order in the case on July 8, 2019, and a preliminary injunction on July 17, 2019.   

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

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