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The United States’ $1.2 trillion student-debt problem has brought out the predatory nature in some companies.

While some firms see a legitimate business opportunity to invest in debt-refinancing, other less-scrupulous companies are using the situation to make a fast buck from vulnerable borrowers who are struggling to make loan payments.

Now, one state is fighting back. Illinois on Monday became the first state to sue debt-settlement companies for allegedly misleading borrowers and charging hundreds of dollars for services they never rendered. According to the attorney general’s office, the companies allegedly pretended to be affiliated with federal debt-relief programs and even charged customers for assistance that the Education Department provides for free.

The state lawsuits accuse Chicago-based First American Tax Defense LLC and Texas-based Broadsword Student Advantage LLC of a number of predatory activities, including charging customers more than $1,000 for help signing up for a fake “Obama forgiveness program.”

“These companies illegally charge fees for services that student loan borrowers can obtain themselves through government programs at no cost,” Attorney General Lisa Madigan said in a statement. “My office will be aggressive in cracking down on scam operations that prey on student loan borrowers for profit.”

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Fusion was unable to reach First American Tax Defense for comment. A spokesman for Broadsword Student Advantage did not immediately respond to a request for a statement.

While Illinois is the first state to take lending companies to court, it likely won’t be the last. As student debt grows, so too have the number of complaints filed against debt-settlement companies, according to the Federal Trade Commission.

The Education Department last year added a financial-aid marketing category to the list of complaints it tracks after noticing an increase in the volume of inquiries about companies’ offerings and legitimacy.

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“Some of these troubling reports from borrowers remind us of the worst practices that emerged in the wake of the meltdown of the mortgage market,” Rohit Chopra, student loan ombudsman for the Consumer Financial Protection Bureau (CFPB), told Fusion in a statement. “In both cases, sloppy servicing spawns scams. Consumers need to receive clear and accurate information about their repayment options from their servicer. Borrowers should know that they don’t have to pay someone to help with their student loan—income-based repayment options that are available at no cost for federal student loans.”

According to the CFPB, about 7 million borrowers have defaulted on more than $100 million in loans. The CFPB last year published a series of tips and warnings on repayment options. Income-based repayment is available at no cost to federal loan borrowers and debt relief companies are not able to negotiate a “special deal” with creditors under federal loan programs, since federal income-driven repayment plans are determined by federal law.

But clearly, not all student borrowers know their rights.

Persis Yu, an attorney with the National Consumer Law Center who handles student loan issues, says it’s “very encouraging to see the state attorney general looking into this.” She said the current federal loan servicing system should be simplified so student borrowers don’t feel the need to turn to private debt settlement companies in the first place.

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She said her organization has “certainly noticed” an increase in the number of debt settlement companies that seem to be targeting student borrowers. Many of the companies are relatively new, she noted. And since it can take time for customers to lodge complaints, it remains unclear just how many borrowers are actually getting duped by predatory practices.

Yu said she hopes other states will follow Illinois’ lead in “cracking down on these companies.”

Emily DeRuy is a Washington, D.C.-based associate editor, covering education, reproductive rights, and inequality. A San Francisco native, she enjoys Giants baseball and misses Philz terribly.