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Debt service files bankruptcy after investigations and lawsuits

Sometimes those who advertise a program to help people organize or pay off their debts must also get debt relief. That is generally what happens in Pennsylvania and nationwide when a company is exposed as not providing the consumer service that it advertises. Recently, a company called the Student Aid Center, Inc. filed for Chapter 7 bankruptcy. The filing comes on the heels of several complaints and a lawsuit filed by an attorney general of one state.

The accusations by state officials allege that the company used deception when it promised to reduce or eliminate the debt of consumers. It is alleged that the company advertised on social media sites and used the technique of getting significant retainers upfront without performing services to justify them. In particular, the company promised in its advertising that it could relieve students of their student debt.

These false promises and deceptive advertising led to the lawsuit filed by the Minnesota Attorney General. This is not, however, the first legal action against the company. In September, a group filed a class action claiming the company used robo-dialing without getting prior consumer consent. That practice is a violation of federal law.

Student Aid, Inc. is named as a defendant in numerous other legal actions complaining of false advertising and similar claims of not providing the service provided. When a company in Pennsylvania or elsewhere asks for a hefty retainer up front while promising unlikely, miraculous results sometime in the future, it may be a sign of trouble ahead. In the least, it indicates the need to research the entity to determine its background. Student Aid's bankruptcy has stayed the civil complaints, and it is now at least questionable whether consumers will be compensated for the company's deceptive business practices.

Source: bizjournals.com, "Troubled student debt company files for Chapter 7 bankruptcy", Nina Lincoff, Feb. 10, 2016

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