LOS ANGELES (CN) - A recidivist California couple preyed on borrowers by charging them up to $5,000 for bogus student and home loan relief services, the FTC claims in Federal Court.
The Federal Trade Commission sued Tobias West and his wife, Kamala West, and five of their companies under seal on Feb. 16. The case was unsealed this week.
The Wests targeted "financially distressed" student loan recipients with eight websites, on which they claimed their companies worked with the U.S. Department of Education, the largest federal lender and loan holder, to reduce clients' payments and stop their wages from being garnished, the FTC says.
The Wests charged $500 to $800 up front, and had their victims electronically sign agreements that authorized the Wests' companies to debit their bank accounts or charge their credit cards, and gave the companies limited power of attorney, the FTC says.
They did not disclose that student loan servicers might reject the agreements "because an electronic signature is an invalid form of signature for this type of instrument" and they are not notarized, the FTC says.
It says the Wests' companies often posed as their clients and entered into forbearance deals with lenders, without telling the clients they did so, or that they would be on the hook for interest payments that for many clients totaled thousands of dollars.
And that's only when the companies bothered to contact the lenders, the government says.
"In many instances, when consumers have contacted their lender, they have discovered that student debt relief defendants never contacted the lender," the complaint states.
Before the Wests got into student loan fraud in June 2014, they defrauded mortgage holders with a similar scam, the FTC says.
They falsely advertised online that their Los Angeles business, defendant AAP Firm & Associates, was staffed by attorneys and worked with lenders to reduce clients' mortgage payments and interest rates, according to the FTC. The AAP Firm charged homeowners $1,000 to $5,000 upfront and promised full refunds if it couldn't obtain mortgage relief, the FTC says. But once the clients paid for the service, AAP Firm disappeared.
"In numerous instances ... defendants remained in contact with the consumer only until the final payment check had cleared the bank," the lawsuit states.
When clients could get ahold of an AAP Firm employee, they were strung along with false assurances that the company was working on their loan. Then in late 2014, AAP Firm told its clients it had sold or transferred their home loans. "When consumers attempted to contact the new firm, they could not reach anyone, or if they did reach someone, the person could not help them," the complaint states.
As with the student loan hoax, the FTC says, many mortgage clients found out the Wests and their company had never even contacted their lenders.
The FTC seeks freezing of assets, a receivership, and penalties for violations of the FTC Act and the Telemarketing Sales Rule.
Here are the defendants: Good EBusiness LLC dba AAP Firm; Student Loan Help Direct; Select Student Loan Help; Select Student Loan Help LLC; Select Document Preparation Inc.; Tobias West, aka Tobey West, aka Toby West, aka Eric West; Komal West.
All the companies operate out of a suite on Wilshire Boulevard in Los Angeles.
Student Loan Help Direct went out of business and an Internet search could not elicit any contact information for the other defendants.
Rising student loan debt has presented opportunities for fraudsters to rip off desperate students in recent years.
"At public and nonprofit colleges in 2014, seven in 10 graduating seniors had student loans. Their average debt was $28,950: up 2 percent compared to the Class of 2013," the Institute for College Access & Success reported in October 2015.
The College Cost Reduction and Access Act of 2007 established income-based payment plans and debt forgiveness programs to help graduates pay off their loans.
Despite the relief programs, the government is not always willing to work with borrowers.
U.S. marshals with guns and combat gear arrested Paul Aker at his Houston home last week, for a $1,500 federal student loan he took out in 1987. Aker signed an agreement to pay off the loan, with interest, which came to $5,900. He'll also have to pay for the costs of his arrest.
A Houston federal judge has issued arrest warrants for another 1,500 people who have not shown up for student loan debt hearings, the U.S. Marshals said in a statement after Aker was arrested.
The federal government had filed 59 lawsuits against delinquent student loan borrowers this year in the Southern District of Texas as of Tuesday morning.Follow @cam_langford
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.