The FTC is dispensing millions in reimbursements to those deceived by a sham student loan scheme.
The FTC announced on Wednesday (March 13) that it will disburse the $4.1 million in restitution to approximately 27,000 consumers who fell victim to a bogus loan forgiveness fraud, according to a press release.
Various aliases were employed in the fraudulent scheme, including Mission Hills Federal, Federal Direct Group, National Secure Processing, and The Student Loan Group, as indicated in the press statement.
In the complaint filed in 2019, the commission stated that the perpetrators had been fooling students since 2014, coercing them into paying hefty unauthorized upfront charges, and feigning to reduce monthly student loan installments.
The fraudsters also duped the students into remitting their monthly student loan payments directly to them under the false pretext of taking over their loan management.
Indeed, only a few payments were actually made towards the students’ loans, and in many instances, none was made. With this, the defendants pocketed the victims’ money for their selfish gains, the FTC revealed.
This disclosure comes a month after the FTC reported that American consumers were defrauded of a record $10 billion in 2023, citing the use of digital tools by fraudsters to easily identify new victims.
The statistics, which was 14% higher than the fraud cases reported the previous year, also indicated that about 2.6 million consumers claimed to have been defrauded.
“The proliferation of digital tools is making it easier for con artists to defraud unsuspecting Americans, as reflected in the data we’re revealing today,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, noted in a press statement. “The FTC is committed to combating these frauds vigorously.”
As the FTC explains, investment scams accounted for the largest proportion of the losses in the previous year, with consumers claiming to have lost $4.6 billion to such con games in 2023, an increase of 21% from the previous year.
On a positive note, the financial sector is also leveraging digital tools to safeguard themselves and their clientele against scams.
A collaborative report by PYMNTS Intelligence and Hawk:AI titled “Financial Institutions Revamping Technologies Against Financial Crimes,” reveals that 70% of financial bodies are utilizing both artificial intelligence (AI) and machine learning (ML) to combat fraud.
These revelations demonstrate that despite the increasing sophistication of fraud tactics, attempts to counteract these methods are also evolving.
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