CFPB Takes Action Against Two Alleged Student Debt Relief Scams

Student loan borrowers have enough to worry about, so they shouldn’t have to deal with being hounded by so-called debt relief companies promising to provide consumers with repayment benefits that actually come free of charge with federal loans. Today, the Consumer Financial Protection Bureau took action to put a stop to two such relief scams that reaped millions of dollars from thousands of consumers.

The CFPB, in conjunction with Florida’s Attorney General Pam Bondi, shut down student debt relief company College Education Services and separately filed a lawsuit against Student Loan Processing.US for illegally marketing student debt relief services.

The Department of Education provides numerous plans to borrowers with federal student loans to make payments more affordable at no extra cost. The CFPB alleges that College Education Services and Student Loan Processing.US illegally tricked borrowers into paying upfront fees for these benefits.

According to the CFPB’s complaint [PDF], Tampa-based College Education Services, its owner, Marcia Elena Vargas, and advisor and employee, Frank Liz, marketed and advertised debt relief services to student loan borrowers with loans in default.

The company advertised its services through Internet ads and websites including and

Before ceasing operations in February 2013, the company collected millions of dollars from consumers by charging illegal advanced fees between $195 and $2,500. Often the company required that all or a portion of its fees be paid upfront.

Under federal law, at least one debt must to be renegotiated, settled, or reduced before a fee can be collected for debt relief services.

The CFPB reports that telemarketers for College Education Services often presented themselves to consumers as counselors.

According to the complaint, these telemarketers promised consumers that they could solve all the student loan issues that plagued consumers.

Additionally, Internet ads and telemarketers guaranteed lower monthly payments for consumers. One College Education Services’ ad said, “Cut Your Student Loan Monthly Payment Up to 50% – Save Today!” The company often failed to deliver the promised results.

For some consumers who qualified for loan consolidation, College Education Services selected monthly repayment plans that increased their monthly payments.

The CFPB alleges that College Education Services promised consumers quick relief from default and garnishments. However, the principal debt relief approach the company used – loan consolidation − did not and could not ensure those benefits in all cases, and not in the quick timeframe the company promised.

To put a stop to the company’s illegal tactics, the CFPB today asked a federal district court to enter a consent order that would ban the company, its owners and operators from engaging in any debt relief business.

In addition to the ban, the proposed order requires College Education Services, Vargas and Liz to pay a $25,000 civil penalty.

In a separate but related filing today, the CFPB filed a lawsuit [PDF] against Student Loan Processing.US to stop the company’s illegal conduct and provide restitution to consumers harmed by the fraudulent actions.

Since 2011, Student Loan Processing.US – a fictitious business name of Irving Web Works, Inc. – along with its owner James Krause allegedly marketed and advertised services to advise and assist borrowers applying for Dept. of Education federal student loan repayment programs.

The California-based company operates websites under the names,, and

According to the CFPB lawsuit, the company and Krause falsely represented an affiliation with the Dept. of Education, charged illegal advance fees and deceived borrowers about the cost and terms of its services.

Many times the company told consumers that it was a consultation service for the Dept. of Education. The company went so far as to used a logo the resembles a government seal, stamps “official business” on its mail to consumers and cites federal law prohibiting mail tampering to create the impression that its marketing material are sent or endorsed by the federal government.

Student Loan Processing.US allegedly charged consumers upfront enrollment fees of either 1% of their federal student loan balance or $250, whichever amount was higher. The CFPB reports that the company required borrowers to pay the entire fee before it would even mail an application to consumers.

Additionally, marketing materials from Student Loan Processing.US fail to clearly explain and disclose that it charges a monthly service fee that continues until the consumer’s federal student loans are paid in full or discharged.

The CFPB reports that in certain cases, the company advises consumers who may qualify for zero payments to pay $39 a month – without adequately explaining that the $39 is going to Student Loan Processing.US as a fee.

In addition to its action against College Education Services and Student Loan Processing.US, the CFPB released a new advisory to all student loan borrowers about companies claiming to offer debt relief.

The CFPB warns students to avoid paying for plans that they can easily get for free and that the services offered by third-party debt relief providers are not a substitute for high-quality student loan servicing and may cost borrowers thousands of dollars and drive them further into debt.

To better protect themselves consumers should look for the following warning signs:

Pressure to pay high upfront fees: Consumers should avoid companies that require payment before they actually do anything, especially if they try to get a credit card number, bank account information, or require that consumers sign a contract.

Requests for a Federal Student Aid PIN: Consumers should be cautious of companies that ask for their Federal Student Aid PIN. This unique ID is the equivalent of a consumer’s signature and giving it away is giving a company the power to perform actions on the consumer’s student loan. Honest companies will work with consumers to come up with a plan without the PIN.

Consumer Financial Protection Bureau Takes Action To End Student “Debt Relief” Scams [CFPB]

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