Washington AG sues firm over illegal student loan practices

Attorney General Bob Ferguson announced action against a student loan debt adjusting firm that exploited borrowers for financial gain.

Ferguson filed a lawsuit Monday charging StudentLoanProcessing.US (SLP) and its president James Krause with violating Washington’s Debt Adjusting Act and Consumer Protection Act, including charging illegal fees for debt adjusting and failing to inform customers of important rights as is legally required. The same services SLP offers are available — for free — through the U.S. Dept. of Education (DOE).

“My office will aggressively crack down on those who prey on student loan borrowers — many of whom are already overburdened — for profit,” Ferguson said. “This firm charged exorbitant and illegal fees for services that student loan borrowers can obtain for free.”

Many student loan debt adjustment firms have sprung up as a result of the $1.2 trillion debt burden carried by nearly 40 million American borrowers. Most offer to help students fill out and submit paperwork to DOE to consolidate their federal student loans.

Since July 2011, SLP has marketed and advertised for-cost services to assist student loan borrowers applying for DOE federal student loan repayment programs, including the Income-Based Repayment Program, and Direct Consolidation Loans.

SLP charged each consumer an upfront enrollment fee of $250, or one percent of their outstanding loan balance, whichever was greater. A vast majority of consumers paid more than the $250 enrollment fee, even as high as $2,000. Washington’s Debt Adjustment Act places a strict limit of $25 on initial fees, meaning even SLP’s minimum fee was ten times the legal limit, the Attorney General’s Office alleges.

The Debt Adjustment Act also dictate’s that a debt adjuster’s fee may not exceed 15 percent of each payment, which SLP’s monthly fee of $39 did for most Washington consumers.

The AGO also alleges SLP failed to include language in its contracts informing consumers of their three-day “right to cancel” period, a further violation of the Debt Adjustment Act.

Violations of the Debt Adjustment Act are automatic violations of the Consumer Protection Act.

A total of 88 Washington consumers, with an average student loan debt of approximately $58,000, used SLP’s services. SLP has received roughly $132,000 in fees from these consumers.

The AGO is seeking:

  • To void all SLP contracts with Washington consumers;
  • Restitution for consumers for all fees paid to SLP;
  • An injunction against SLP prohibiting future violations of the Debt Adjustment Act and Consumer Protection Act;
  • Payment of $2,000 for each violation of the Consumer Protection Act; and
  • Attorney’s costs and fees.

The complaint can be found here.

Assistant Attorneys General John Nelson and Ben Roesch are leads on this case.

Apply for U.S. Department of Education federal repayment programs for free

For most federal borrowers, the consolidation process is fairly straightforward:  The borrower fills out a two-page application, verifies his or her employment and income, and submits the package to the DOE.  This service is done through the DOE for free and typically takes four to six weeks.  Learn more here: www.StudentLoans.gov.

Free student loan debt assistance

Ferguson urges current and former students never to pay upfront for help with student loan debt relief.  For information on legitimate sources of free assistance, contact the Consumer Financial Protection Bureau or the National Consumer Law Center.

For problems with your student loan servicer or a debt collector contact the U.S. Department of Education’s Student Loan Ombudsman at 1-877-557-2575 or www.ombudsman.ed.gov, the Consumer Financial Protection Bureau, or file a complaint with the Washington State Attorney General’s Office.

Washingon State Governor, Attorney General lead legal response to Supreme Court psychiatric boarding decision

On Friday Attorney General Bob Ferguson, in conjunction with a broad coalition of organizations, filed a motion in the Washington State Supreme Court to address the impacts of the court’s recent decision on psychiatric boarding. The motion asks the court to delay the effect of its decision so that the state can implement Governor Jay Inslee’s plan to make sure alternative care is available.

A broad coalition of hospitals, healthcare organizations and disability rights groups joined today’s motion. All of these groups had earlier asked the court to end psychiatric boarding. They nonetheless joined this request to ensure that the practice can be ended in a responsible manner, through implementation of a plan developed by the state Department of Social and Health Services. As the first step in that plan, Inslee today approved the immediate expenditure of $30 million for DSHS to purchase mental health services for some of the patients currently involuntarily detained.

The state respects the court’s ruling, but is aware that immediate implementation without alternatives in place could cause severe negative consequences. As a result the state, healthcare providers, hospitals and disability rights organizations are asking the court to delay the effective date of its ruling by 120 days to give the system time to adapt.

“My office wants to ensure the state is able to implement the court’s decision in a way that protects vulnerable individuals, public safety and healthcare providers,” said Ferguson. “No one would benefit from the release of people in mental health crisis without treatment. We hope the court will see the broad consensus in support of this motion and grant it.”

“I appreciate that so many parties have come together to agree on this plan,” Inslee said. “We are not challenging the Supreme Court ruling. We all want to implement the decision but we need to make sure patients receive the treatment they need and that the community is protected.”

Under state law, counties may detain individuals with “a mental disorder” for evaluation and treatment who are a threat to themselves or others. In recent years, counties have often relied on psychiatric boarding in hospital emergency rooms for such individuals because of a lack of space in certified evaluation and treatment facilities. On August 7, the Supreme Court held in the case In re Detention of D.W. that state law does not allow psychiatric boarding.

Under the court’s normal rules, its decision would become effective 20 days after being issued, i.e., on August 27.  As has been widely reported, ending psychiatric boarding so quickly could lead to serious problems for people in mental crisis, counties, hospitals and the general public. Without sufficient certified-treatment facilities available, many people who present a threat to themselves or others will be released without treatment.

To avoid this result, the AGO, governor and the Department of Social and Health Services have worked closely with healthcare organizations, hospitals, and disability rights advocates to come up with an interim solution.

In the motion filed today, the parties detail the plan they have developed, and ask the court to delay the effect of its ruling for 120 days to allow the plan to be put into place. The plan calls for the state to make available 145 additional certified evaluation and treatment beds over the next 120 days. Additionally, the governor and DSHS intend to work with legislative leaders to develop a longer-term solution.

The motion, available here, is being filed on behalf of DSHS, Multi Care Health System, Franciscan Health System, the Washington State Hospital Association, Disability Rights Washington, the Washington State Medical Association, the ACLU of Washington, the National Alliance on Mental Illness Washington, the Washington Association of Public Hospital Districts, the NW Organization of Nurse Executives, the Washington Chapter of American College of Emergency Physicians, the Washington Council of Emergency Nurse Executives, Washington State Nurses Association and SEIU 1199NW (which represents nurses).

Washington Attorney General sues owner of Olympic Animal Sanctuary

A Forks resident who raised $300,000 for a non-profit dog rescue organization, but failed to register with the Secretary of State or produce required records of how the donations were spent, has been sued by the Attorney General’s Office for violating Washington’s Charitable Solicitations Act and Consumer Protection Act.

Stephen C. Markwell, founder of Olympic Animal Sanctuary, is accused of unlawfully soliciting and collecting hundreds of thousands of dollars in charitable donations while not being registered as a charity with the Secretary of State.

According to the Attorney General’s complaint, filed today in Clallam County Superior Court, Markwell also failed to maintain records of how the charitable donations were spent.

“Olympic Animal Sanctuary failed to account for how charitable money was spent,” said Attorney General Bob Ferguson.  “When organizations don’t comply with the law, we step in to protect both the public and the vast majority of our state’s charities that do comply with the law.”

Markwell registered Olympic Animal Sanctuary as a federal, tax-exempt non-profit organization in 2007.  However, his operation was not registered in Washington as required by law, until April 2013, when he was contacted by the Secretary of State.

During the six-year interim, his organization reported more than $300,000 in revenue generated from public donations.

As of Dec. 2013, Markwell no longer operates the Olympic Animal Sanctuary and has surrendered the dogs to a shelter in Arizona.

The Attorney General’s action does not address allegations of animal abuse or neglect as those issues do not fall within the Consumer Protection Act or Charitable Solicitation Act.

Concerns regarding animal welfare should be directed to city or county law enforcement and local animal care and control agencies. Consumers with concerns specifically about Olympic Animal Sanctuary and Stephen Markwell can contact Clallam County Animal Control at (360) 417-2459, or the Forks Police Department at (360) 374-2223.

For more information on finding charities, visit the SOS charity lookup. Consumers can also visit the SOS website for tips on giving wisely.

Washington Attorney General files lawsuit against company behind failed crowdfunded project

Consumers who financially backed a failed crowdfunding project are finally getting some backing of their own. Washington State Attorney General Bob Ferguson filed the first consumer protection lawsuit in the nation involving crowdfunding on Thursday.

Crowdfunding is a way for people to secure financing for their initiatives directly from a large pool of backers who generally provide small amounts of financial support. Crowdfunding campaigns benefit a broad range of initiatives from movie-making to high-tech gadgets to charitable giving.

The AGO lawsuit is against Edward J. Polchlepek III, otherwise known as Ed Nash, and his company, Altius Management, who ran the “Asylum Playing Cards” crowdfunding campaign in 2012 through a crowdfunding service called Kickstarter. Under Kickstarter’s terms of use, consumers who back a Kickstarter project make a financial pledge in exchange for an agreed upon product or “reward” that the project is legally required to deliver.

In this case, consumers pledged funds in exchange for decks of playing cards featuring a retro-horror theme and other similar items. The AGO alleges Polchlepek and Altius took consumer money and failed to deliver the promised playing cards and other rewards to these consumers.

This case marks the first state enforcement action against a crowdfunded project that hasn’t delivered the goods promised to consumers.

“Consumers need to be aware that crowdfunding is not without risk,” said Ferguson. “This lawsuit sends a clear message to people seeking the public’s money:  Washington state will not tolerate crowdfunding theft. The Attorney General’s Office will hold those accountable who don’t play by the rules.”

Overview of the Asylum Playing Cards campaign

The Asylum Playing Cards campaign raised $25,146 from 810 backers, including at least 31 from Washington state in 2012. The campaign involved a project to print and market a deck of cards and other items featuring artwork created by a Serbian artist.

Project backers were promised the playing cards and other rewards with an estimated delivery date of December 2012. To date, the project has not been completed and none of the backers have received any of the promised items or any refunds. Additionally, the company has not communicated with its backers since July 2013.

Kickstarter’s terms of use make clear that companies are legally obligated to fulfill the promised rewards or provide consumer refunds.

Lawsuit seeks restitution for consumers

The complaint against Altius Management and Edward J. Polchlopek III, filed in King County Superior Court, seeks:

• Restitution for consumers;
• As much as $2,000 per violation of the Consumer Protection Act in civil penalties; and
• The state’s costs and attorneys’ fees for bringing the suit.

The state’s case is being handled by Assistant Attorney General Jake Bernstein.

A copy of the complaint filed today can be found here.

CONSUMER ALERT: Wash. officials warn of consumer rip-offs by mudslide charity scams

OLYMPIA — As donors consider contributing to relief efforts for the Snohomish County mudslide tragedy, Attorney General Bob Ferguson and Secretary of State Kim Wyman are urging consumers to be on guard against scam artists who try to take advantage of the situation.

The officials joined forces with the Better Business Bureau in reminding consumers that rip-off artists follow news coverage of natural disasters like this one and swoop in under the guise of helping victims, but end up victimizing the well-intended donors.

“All of us in Washington and around the country have deep sympathy for the victims and their loved ones and friends at this tragic time,” Ferguson said.

“It is a natural instinct to want to provide assistance right away, but Secretary Wyman, the BBB and I advise potential donors to exercise caution and make sure their hard-earned dollars go for the purpose intended, not to line the pockets of scam-artists.”

Wyman added: “Our hearts go out to everyone affected by this horrific mudslide.  So much was lost by so many. I’m heartened that many Washingtonians have a strong impulse to be a part of the relief effort, at least financially, and to help the victims of this tragedy. I support that, obviously.

“But as the Attorney General and I continue to emphasize in times like these, sadly there always seem to be rip-off artists who take advantage of people. It is shameful, but some so-called charities take advantage of our generous nature.  I want people to donate to charities they know and trust, if that’s their desire, and I want no one’s money used to simply line some con-artist’s pocket.”

BBB joined in the consumer alert.

“We are saddened at the loss of life and devastation caused by the mudslides in Oso,” said Tyler Andrew, CEO of Better Business Bureau, serving Alaska, Oregon and Western Washington. “We know helping those in need is a top priority, but people must be proactive and careful to ensure that gifts are effectively used for making a difference in the community.”

The BBB, Attorney General’s Consumer Protection Division and the Secretary of State’s charities program offered these tips for prudent gift-giving:

•    Be suspicious of solicitors requesting immediate donations. Don’t rush decisions and consider contributing at give.org, a website run by the Council of Better Business Bureaus.
•    Make sure that charities are qualified to provide the type of disaster relief that is necessary.
•    Avoid cash donations. Write a check directly to the charity, not the fundraiser.
•    Never give out credit card numbers over the phone.
•    Be wary of “new” charities with unverifiable background information.
•    Watch out for solicitations from fake “victim” or memorial social media accounts.
•    Don’t be fooled by a name. Be watchful of charities that use sympathetic sounding names or names similar to well-known legitimate charities.

The Better Business Bureau, the Washington Attorney General and Secretary of State advise consumers to contact potential charities directly. For more information on finding charities, visit BBB’s charity review or theSOS charity lookup. Consumers can also visit the SOS web site for tips on giving wisely.