Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Loan forgiveness businesses barred from debt relief market after misleading consumers, (May 16, 2025)

By Jody Coultas, J.D.

The FTC had alleged that the companies falsely represented themselves as affiliates of the Department of Education.

Several companies operating a guaranteed loan forgiveness businesses have been permanently barred from the debt relief business and ordered to return assets in order to resolve FTC claims that they tricked consumers into paying illegal fees toward fake student loan forgiveness, the agency announced (FTC v. Panda Benefit Services, LLC, FTC File No. 2423041, No. 8:24-cv-01386-CAS-RAO (C.D. Cal. May 16, 2025)).

Background. Student loan debt is the second largest class of consumer debt, with over 43 million borrowers owing over $1.72 trillion. Student loan debt is also one of the most distressed classes of debt: roughly one in ten Americans have defaulted on a student loan, and nearly a quarter of borrowers default within their first five years of repayment.

California-based Panda Benefit Services (also doing business as Prosperity Benefit Services), Clarity Support Services, Pacific Quest Services, Prosperity Loan Services, Public Processing Services, Quick Start Services, Select Student Services, Signature Processing Services, and its operators allegedly told consumers that their program guaranteed loan forgiveness and/or significantly reduced loan payments. Since at least June 2021, the operators would send mailers with urgent language like “FINAL NOTICE” and “Time Sensitive,” and boasted benefits like “complete loan forgiveness” and “tax free loan forgiveness” to entice consumers to call them and speak to a telemarketer. When consumers called the number on the mailers, they would speak with telemarketers who then convinced them that if they signed up for the debt relief program, they would be eligible for loan forgiveness after only a few months or years, a substantially shorter time than what is available under federal government repayment programs. Many consumers have reported that after signing up and making payments, they never received loan forgiveness and that the scheme’s operators never applied for loan forgiveness on their behalf.

Also, the companies allegedly falsely claimed that they would take over consumers’ loans and claimed that they buy their loans from consumers’ federal servicers, and falsely claimed they worked with or were affiliated with the Department of Education. The scheme’s operators were able to obtain consumers’ bank account or debit card information and collected hundreds of dollars in illegal upfront fees from consumers, according to the FTC. The scheme netted the operators over $20.3 million.

The complaint argued that the scheme operators did not obtain loan forgiveness or lower payments for consumers. Because borrowers of federal student loans were not required to make payments on their loans between March 2020 and October 2023 due to the federal COVID-19 payment pause, many consumers went months or years before finding out that their student loan payments were not lowered and that their loans had not been forgiven.

Orders. The final orders ban the companies from the debt relief industry. The orders against Select Student Services and Eduardo Martinez and Public Processing Services, Quick Start Services, and Signature Processing Services also ban them from telemarketing. In addition, the orders prohibit the defendants from: making any misrepresentations about other products or services; using false statements to collect consumers’ financial information; and impersonating any other people or government entities.

Finally, the order as to Student Services and Martinez impose a monetary judgment of nearly $16.8 million, which, in the case of the stipulated orders, is mostly suspended due to an inability to pay. Those defendants are required to turn over millions in personal and business assets.

The federal district court in Los Angeles entered a stipulated order with Select Student Services and Eduardo Martinez, and a default judgment against Public Processing Services, Quick Start Services, and Signature Processing Services. Previously, the court entered stipulated orders with Panda Benefit Services, Pacific Quest Services, Prosperity Loan Services, Emiliano Salinas, and Melissa Salinas and with Clarity Support Services and Christopher Hanson.

Companies: Panda Benefit Services; Clarity Support Services; Pacific Quest Services; Prosperity Loan Services; Public Processing Services; Quick Start Services; Select Student Services; Signature Processing Services

News: ConsumerProtection CaliforniaNews FederalTradeCommissionNews