The Art Institute of Jacksonville Engaged in Fraud: Why this may mean you are not obligated to repay your private student loan.
Yes, the Art Institute of Jacksonville engaged in fraud. If you have found your way to this article, I am sure you are not jumping out of your seat at this revelation. As you undoubtedly already know, the closed for-profit institution was sued by both the federal government and the state of Florida for financial aid fraud.
The Art Institute of Jacksonville was a subsidiary of Education Management Corporation (EDMC). EDMC and its subsidiary, The Art Institute of Jacksonville, had an illegal compensation system that based admissions personnel compensation upon the number of students recruited by each admissions employee.
EDMC and its subsidiary, The Art Institute of Jacksonville, also condoned and encouraged misrepresentation and high pressure sales tactics for purposes of enrolling students and thus increasing profits. This led to some pretty outrageous recruitment tactics and to some seriously shady financial aid practices that left many students on the hook for thousands with nothing to show for it.
Fast forward a couple of years and yep, debt buyers are suing students on debt that is the product of fraud. Fortunately, the FTC Holder Rule generally requires the promissory note to contain language stating: “ANY HOLDER OF THIS CREDIT AGREEMENT IS SUBJECT TO ALL CLAIMS AND DEFENSES WHICH I COULD ASSERT AGAINST THE SCHOOL FOR THE SERVICES OBTAINED WITH THE PROCEEDS HEREOF.”
Yes, in English please, I know. What this means is that if you attended the school because of the school’s fraudulent misrepresentations to you, then you have a defense you could assert against the school. And, because of the Holder Clause you can assert the defense against the holder of the loan.
Let me make this simpler. Say you hire someone to build a 2000 sq ft house for you. And instead of building a house, they build you a tiny little doghouse. Then they run off to court and sue you saying “He/She did not pay me for building that house.” Yes, you guessed it, your defense is “they built a doghouse”.
Here, if the "school" lied to you to trick you into signing a promissory note and you never received the promised services, you have a defense against the school. And fortunately, because of the FTC Holder Rule, you probably also have a defense against the lender/holder.
I had a couple people call me with this exact situation the other day. Not only did we successfully defend the lawsuits that had been filed against them but we recovered their attorney fees from the other party(s) and cleared the adverse information off their credit report as well.
Of course, I have to give a disclaimer. All circumstances are different and this is not in any way to be construed as a prediction of what would happen in your case. But the point is, be aware that you may have valid defenses. And always consult with a licensed attorney experienced in this area if you believe you were the victim of fraud or are sued on a loan.
Call me at (904) 419-9858 if you want a free initial consultation.