Student Debt Doctor: "Sign It While I Wait" and the Forbearance Trap

The Case

The FTC sued Student Debt Doctor LLC (SDD), a Fort Lauderdale company, and its owner, Gary Brent White, Jr., in the U.S. District Court for the Southern District of Florida (Case No. 17-CV-61937). The complaint was filed under seal in early October 2017, and on October 3, 2017, the court issued a temporary restraining order and froze the defendants' assets.

The case was part of "Operation Game of Loans," a coordinated federal and state crackdown on student loan debt relief schemes that the FTC announced in October 2017.

How the Pitch Worked

According to the FTC complaint, since about January 2014 SDD:

• Promised to enroll borrowers in programs that would reduce or eliminate their monthly payments and balances
• Made those claims in online ads, emails, and telemarketing calls, with some consumers calling in after seeing ads and others getting outbound calls
• Used website lines like "our clients may t[y]pically receive $0 a month payments with a complete loan forgiveness at the end of the programs"
• Had telemarketers falsely promise forgiveness in five years or less
• Created urgency, emailed a link to an online contract, and pushed consumers to sign quickly, often while the telemarketer was still on the phone
• Charged illegal advance fees, typically $750

The Forbearance Problem

Here's the sneaky part. The FTC said SDD sometimes contacted servicers only to put loans into temporary forbearance. That delayed people from discovering they hadn't been enrolled in a new repayment plan, while fees kept coming and interest kept growing. The FTC also said SDD told some borrowers their loans were in forbearance when they weren't, so people missed payments and their credit scores dropped. Some ended up owing more than when they started.

The complaint also pointed out that borrowers can apply for federal repayment and forgiveness programs through the U.S. Department of Education (ED) or their servicers at no cost.

The Law

The FTC charged violations of the FTC Act and the Telemarketing Sales Rule (TSR). Under the TSR, a debt relief company can't take fees until it has actually changed the terms of at least one debt and the customer has made a payment under the new arrangement.

The Outcome

The court entered a stipulated final order on November 30, 2018. According to the FTC, it:

• Bans White and SDD from the debt relief business
• Prohibits misrepresentations about financial products or services
• Imposes a partially suspended $13 million judgment and requires about $2.2 million in payments

The FTC said SDD collected at least $7 million from borrowers. In June 2022, the agency announced it was sending 22,817 checks totaling more than $2 million.

The Takeaway

Pressure to sign while you're on the phone is a sales tactic, not a service. And for debt relief sold by phone, the fee comes after results, not before.