Student Aid Center|Was a Scam, State Says

SEATTLE (CN) — Washington's attorney general sued the owners of a bankrupt student loan consolidation company, claiming they paid themselves millions of dollars while charging illegal fees to struggling students.

The attorney general says Damien Alvarez paid himself $2.5 million last year, his half-brother Ramiro Fernandez-Moris paid himself $1.5 million, and they handed out more money to relatives.

The state sued them and their company, the Student Aid Center, which is in Chapter 7 bankruptcy proceedings in Florida. The Federal Trade Commission and the District of Columbia also sued Student Aid Center on Wednesday for misleading consumers and charging illegal fees.

Washington state's four-count lawsuit accuses them, among other things, of violating Washington's Debt Adjustment Act by taking fees at least four times the legal limit.

"Mr. Alvarez also controlled and directed Student Aid Center, Inc.'s activities by employing numerous family members within the company — including Alan Alvarez (his father, who was paid $245,839.73 from Oct. 13 through Nov. 3, 2015), Elizabeth Alvarez (his mother), Samantha Alvarez (his wife), Michael Alvarez, and Lauren Alvarez," according to the complaint.

Student Aid Center advertised counseling, advice and assistance to student loan borrowers applying for federal student loan repayment programs.

Washington limits the amount companies can charge for debt adjustment services, which is what Student Aid Center provided, to an initial charge of $25, but the company charged far more than that.

"Each and every one of the more than 800 contracts between defendant and Washington consumers provides for an initial fee of at least $99.00, and for most consumers an initial payment in the amount of $199.00 or more. Some consumers made initial payments of $240.00, $299.00, and up to $995.00. In many cases, defendant charged additional installments of between $99.00 and $597.00 before the consumer's student loans were consolidated or placed into an income-based repayment plan.

"As a result, defendant sought and/or took an initial fee of at least four (4) times the legal limit — and often many more times the legal limit — in each and every one of its contracts with Washington consumers, in violation of RCW 18.28.080(1)," the attorney general says.

The state wants every contract the company made with Washington consumers to be declared void and all payments refunded.

"Hard-working residents often take on significant amounts of debt in order to further their education. They should be able to avail themselves of the many tools available to help relieve their debt burdens, without being preyed upon by fraudsters," the District of Columbia's Attorney General Karl Racine said.

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Email *

Submit