OPINION & ORDER The Attorney General of the State of New York brings this civil enforcement action on behalf of the People of the State of New York (“Plaintiff”) against ten entities and two individuals (collectively, “Defendants”) who are involved in an allegedly fraudulent and deceptive scheme targeted at consumers with student loan debt. According to Plaintiff, Defendants’ actions in marketing, selling, and financing programs that purportedly provide debt relief services violate numerous provisions of state and federal consumer protection law. Ten of the twelve Defendants1 have moved to dismiss the Second Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. For the following reasons, Defendants’ motions to dismiss are DENIED.I. FACTUAL BACKGROUNDThe Court takes the following facts, which are assumed to be true for the purposes of this motion, from the operative complaint in this action. See, e.g., LaFaro v. N. Y. Cardiothoracic Grp., PLLC, 570 F.3d 471, 475 (2d Cir. 2009).Defendants are ten entities and two individuals who market, sell, and finance programs that “claim to help student loan borrowers struggling with debt reduce or eliminate their federal student loan debt.” Dkt. No. 41 4. According to the Complaint, these programs are offered for free from the federal government, but Defendants charge hundreds of dollars in fees in exchange for enrollment in the programs. Id. 6. The Complaint alleges that, in order to induce consumers to purchase these services, Defendants make numerous misrepresentations, including claims that “borrowers cannot apply on their own” for the services, that Defendants are “loan experts,” and/or are affiliated with the federal government, and “that the fees paid by borrowers will be applied to pay their student loan balances.” Id.
5-6. In addition, the Complaint alleges, Defendants provide “incomplete and harmful advice” concerning available options, sometimes worsening borrowers’ financial situations. Id. 6. When borrowers agree to purchase debt relief services from Defendants, they are required to pay a fee upfront. Id. 9. In some cases, borrowers are directed to enter into financing contracts with interest rates of as high as 21 percent in order to pay the fees. Id. 11. As alleged, these financing agreements “claim[] to provide open-ended credit,” but in fact are closed-end credit plans. Id. 14. This conduct has been the subject of hundreds of consumer complaints to the Better Business Bureau (“BBB”) and the Consumer Financial Protection Bureau (“CFPB”). Id.
