Class Action Claims Alum Financial Misrepresents Student Loan Relief Services

Our firm filed suit for a student loan borrower who was seeking relief under a special federal program. Class Action Reporter reporter Erin Shaak wrote a news wire release regarding our case.

A proposed class action alleges Alum Financial, LLC has misrepresented to student loan borrowers that they must contract with the agency for a fee in order to take advantage of government student loan forgiveness and consolidation programs.

According to the case, Alum, a for-profit student loan debt relief organization, has positioned itself to consumers as the go-between for borrowers in search of debt relief services through federal programs. In reality, the suit says, consumers can qualify for such programs without contracting with Alum and paying the agency's fees, which the case says are sometimes disguised as a “payment plan” for borrowers' debts. 

“Alum is not an agency people must go through in order to qualify for these loan consolidation programs and the payment plan is not a student loan payment plan but rather a payment plan for payment of Alum's fees,” the complaint alleges.

The plaintiff in the case is a Santa Fe, New Mexico resident who claims she was “struggling with student loan debt” when she found out that her work as a mental health professional for a nonprofit may qualify her for the U.S. Department of Education's Public Service Loan Forgiveness program. After the plaintiff faxed her application for the program to the U.S. DOE's FedLoan Servicing fax number, she began getting calls from “unfamiliar numbers,” the suit relays. Per the case, the callers left messages stating the plaintiff was eligible for the Public Service Loan Forgiveness program but that her application was incomplete and that she must complete the process “in a timely manner” given eligibility is “on a first come first served basis.”

When the plaintiff returned the calls, an Alum employee informed her that Alum “was the agency people must work through” in order to qualify for federal loan consolidation programs, the suit says. Believing these representations to be true, the plaintiff signed a contract with a payment plan that she mistakenly thought would go toward her student loan payments through the federal program, according to the case.

The lawsuit claims, however, that the defendant's contracts are not based on any particular program for which a borrower might qualify but instead amount to contracts for Alum's services, which the company claims will identify all the programs for which an individual qualifies and determine “the best option for that person.” 

In truth, the suit contends, consumers with student loan debt are not required to go through Alum to obtain relief through government programs, as the plaintiff was led to believe. The case argues that Alum kept fees from the plaintiff's payment plan before actually providing any benefit, i.e., before she was even enrolled in any loan consolidation and forgiveness plan.

According to the suit, the representations made to the plaintiff are “part of scripts” used by Alum employees to deceive student loan borrowers into signing form contracts with Alum. The contracts, the case alleges, falsely state that Alum will charge borrowers' accounts “for the sole purpose of [their] student loans” while disguising the fact that the defendant is charging them fees.

“This statement in the contract is false and misleading and, at a minimum, tends to deceive consumers into believing these payments are student loan payments and not simply fees paid to Alum for its services,” the complaint claims.

The lawsuit, which was removed from state to federal court in New Mexico on August 20, looks to cover New Mexico residents who were enrolled by Alum in its student loan relief and/or consolidation program.

Humphreys Wallace Humphreys amended the case in the fall and are bringing a nationwide class action against Alum for making unauthorized "robo calls" in violation of the Telephone Consumer Protection Action Act. 

If you have been contacted by Alum Financial or any other student loan "debt consolidation" or "debt management" company,

Thank you to Erin and Class Action Reporter for covering our case.