Legal Question in Consumer Law in Maryland

I work for a company that does document preparation to enroll qualified people into the William D. Ford Federal Direct Loans Program, the Teacher Loan Forgiveness Program, the Public Service Forgiveness Program and the Disability Discharge Program. We only charge a document processing fee after we do the work, but before the new loan is issued or the programs approved, since we have no control or participation in the end result of these applications. For the Direct Loans Program, we provide a written guarantee that if the loan is denied due to our company error, all fees will be refunded. Since the DOE just changed the enrollment process, a LPOA is now required to prepare the docs, which wasn't needed before when all the original docs were signed by the borrower/applicant. We charge very modest fees and no reoccurring fees, which is an outright scam. We also go out of our way to educate people on all the aspects and options of these programs, which is more than their current student loan servicers do or the Dept of Education, for that matter. In cases where there is no benefit to the prospect or that prospect does not qualify, we make that position clear to the prospect. For people already enrolled in the DL program, we explain the benefits and options to them, since in every single case, the prospect has no idea what loan they are in or what choices are available to them. We do this, even though we know we will not benefit from this. Our company is trying to do right by these people, and the owners are very ethical people who pay us a living wage, do not pay commission and they perform a time- and work-intensive service for a very modest amount of money.

Now a local lawyer is telling the owners of the company that this document preparation is exactly like the Debt Settlement industry and it falls under the same laws and guidelines, even though we do not collect client funds, hold them in escrow, nor do we negotiate specific terms with the Department of Education. This lawyer, who is making a fortune by promoting himself as an “expert” in this field, is telling us that we cannot charge any fees until the loans are funded or applicants are accepted into these programs. I worked for over 12 years in Consumer Protection, Credit Counseling and Debt Management, and this business is nothing like DMP or DS, it is merely preparing documents and educating consumers. I have tried to locate this stipulation in the current federal and state laws, and I cannot find it anywhere. Is this attorney correct, or is this just some scam he cooked up to collect a lot of money from a suddenly very crowded industry of student loan assistance companies, many of whom charge outrageous amounts of money and do little or no work that benefits people struggling with federal student loans?

Asked on 3/14/14, 8:42 pm

1 Answer from Attorneys

Cedulie Laumann Arden Law Firm, LLC

Any company facing litigation or threat of litigation is well advised to seek independent legal counsel. This online bulletin board is not able to analyze specific cases or give legal advice.

Generally, however, Maryland law does regulate businesses that are involved as intermediaries in any credit related transactions. Lenders are separately regulated. A business may be required to obtain certain licensure and follow certain procedures even if it is not itself loaning money or extending credit. Your company (and any other in this field) will want to look at the Credit Services Business Act and may want to contact the Commissioner of Financial Regulation.

Again, I encourage you to privately consult with an attorney to review your business practices in detail or at the very least consult the statutes and/or the governing authorities.

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Answered on 3/15/14, 8:03 am

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