Can Search Engines Stop Student Loan Scammers?

Published

June 26, 2015

Bob Sullivan is author of the New York Times best-sellers Gotcha Capitalism and Stop Getting Ripped Off. His stories have appeared in The New York Times, the Wall Street Journal, and hundreds of other publications. He has appeared as a consumer advocate and technology expert numerous times on NBC's TODAY show, NBC Nightly News, CNBC, NPR's Marketplace, Terry Gross' Fresh Air, and various other radio and TV outlets. He helped start MSNBC.com and wrote there for nearly 20 years, most of it penning the consumer advocacy column The Red Tape Chronicles. See more at www.bobsullivan.net. Follow Bob Sullivan on Facebook or Twitter.

If you’ve checked your spam folder recently, you know that offers of student loan debt relief have exploded right along with the student loan debt problem. You probably know it’s a bad idea to answer spam in a quest to lower your loan payments, but you might be more inclined to answer an advertisement you see on a major search engine like Google, Yahoo or Bing. If you do, you’ll likely get a bad deal, warns the Consumer Financial Protection Bureau, which this weekend sent a letter to the search companies asking for help with the vexing problem.

The letter, signed by CFPB student loan watchdog Rohit Chopra, urged the search engines to more closely monitor advertising and “drive traffic towards unbiased sources of information…(so) scammers will be less likely to flourish.”

On Tuesday, the top advertisement appearing after a Google search on the topic promised visitors help taking advantage of new federal loan forgiveness programs. (A similar search on Bing and Yahoo bring up the same results.) Call, and you’ll eventually learn that the fee is five monthly payments of $199 for a program that is offered free by the Department of Education.

Chopra compared the glut of ads to a similar problem that arose when the housing debt bubble burst.

“The CFPB’s analysis of Google Trends data suggests that struggling borrowers are indeed searching for help using keywords such as ‘student loan default,’ ‘student loan forgiveness, and ‘Obama student loan relief.’ This bears a close resemblance to the foreclosure crisis, where borrowers were given conflicting information about their options and found scammers who made false promises on loan modifications in exchange for upfront fees,” he wrote in a letter to Google.

Google responded to a request for comment about the problem with a statement saying it removes millions of potentially fraudulent ads each year.

“We prohibit all forms of misrepresentation in ads, and have specific policies against ads that misrepresent financial services,” the statement read. “We work hard to keep our advertising ecosystem clean and last year alone we disabled more than 524 million ads. When we become aware of an ad that violates our policies, we’ll not only remove it, but in many cases remove the advertiser as well.”

Under federal law, it’s illegal for a company to collect a fee for debt relief services until at least one debt is renegotiated, settled or reduced.

The search companies are in a tough spot. While it’s logical to criticize them for making money through advertisements that involve student loan products that could harm consumers, search engines are not in a position to manually review every ad — and proactively removing advertisements for alleged illegal activity is tricky business. Instead, they tend to be reactive, and rely on complaints.

The Consumer Financial Protection Bureau has warned borrowers not to work with firms that charge an upfront fee, and in December shut down two such firms. A firm named Student Loan Processing allegedly implied to consumers that it had a relationship with the U.S. Department of Education, and charged an upfront enrollment fee of 1% of the borrower’s outstanding balance, the CFPB said. The second firm, College Education Services, allegedly “guaranteed” lower monthly payments and charged upfront fees ranging from $195 to $2,500.

Consumers who are having trouble making their student loan payments have options they can explore with their loan servicers. It’s important to try to work out a manageable payment plan so that you don’t fall behind and hurt your credit. You can see how your student loans are affecting your credit by getting your free credit report summary on Credit.com.