Predatory student loan services are on notice this week after Illinois Attorney General Lisa Madigan filed lawsuits against two “scam operations that prey on student loan borrowers.” It’s the first lawsuit of its kind, and one of Madigan’s targets is Carrollton-based Broadsword Student Advantage.
Broadsword uses radio ads and other marketing tools to lure potential customers to its loan repayment services, capitalizing on a growing demand—the nation’s climbing student loan debt has tripled in a decade, and surpassed the $1 trillion mark two years ago. Broadsword is part of a new world of debt settlement firms, which promise to lower monthly payments in exchange for up-front fees, getting into the student loan business.
Some loan repayment services are already available for free through the U.S. Department of Education, but Broadsword claims that people are “turned off by its complexities and paperwork.” Instead, Broadsword and other loan repayment businesses charge high upfront charges and monthly fees to process loan repayments.
According to the lawsuit, Broadsword ads target specific professionals with claims that their loans can be forgiven:
“Attention teachers, nurses, social workers, government employees, police officers, and firefighters if you’re still paying on student loans get ready for a special announcement. Your entire student loan can be forgiven. You heard correctly. Broadsword Student Advantage has free information on how you could potentially have the remaining balance on your student loan debt forgiven.”
Madigan’s suit says that these ads, along with Broadsword’s domain www.getforgiven.org, are a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act.
The domain appears to be a “source for consumers to obtain student loan debt forgiveness,” according to the lawsuit. In fact, student loan forgiveness is a federal program through the Department of Education with specific requirements. Broadsword doesn’t inform its consumers of these requirements, either, the suit claims.
In one instance described in the complaint, a public school teacher in Illinois called Broadsword after hearing a radio ad. She was pressured into giving her bank account number so the company could debit $499 for services (though the company’s ads claims it offers free information). After being told she qualified for loan forgiveness, the teacher found out several months (and $898.60 later) that her job as a teacher made her ineligible for loan forgiveness.
The lawsuit also alleges that Broadsword and its affiliates try to get power of attorney from their customers so the company can file documents, get information and even intercept communication from the loan servicer to the borrower.
When customers are charged for Broadsword’s services, they are billed by a separate financial planning firm called Affordable Life Plans. This company shares an address and phone number with Broadsword, and its About Us page includes the Bible verse “Where there is no vision, the people perish.”
The lawsuit included complaints from people who hadn’t signed up with Affordable Life Plans, or gotten any financial advice beyond the loan service, yet were billed by Affordable Life Plans—possibly to minimize Broadsword’s risk. “Defendants are directing fees to Affordable Life Plans as a subterfuge in an attempt to escape liability for offering student loan debt relief services in violation of the Illinois Debt Settlement Act,” the lawsuit states.
Broadsword Student Advantage, LLC, was organized in August 2012 by its president, Kenneth L. Talbert, the man behind other financial firms like EFA Processing (a debt settlement company), DebtXS, Eckity Capital Markets, Safeguard Capital and CocoaLife of Texas, to name a few. Talbert’s interconnected business entities have been scrutinized before, and he’s been compared to Bernie Madoff by a former employee for his debt settlement business.
If the court finds Broadsword intended to defraud its customers, the firm could be charged a civil penalty up to $50,000 per violation. Broadsword didn’t return the Observer’s requests for comment.