Feds Shut Down Illegal Student Loan Debt Relief Operation

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Last December, the Consumer Financial Protection Bureau filed a lawsuit against Student Loan Processing.US, a debt relief operation, that allegedly reaped millions of dollars from thousands of consumer by promising to provide repayment benefits that come free of charge with federal student loans. Today, the agency took steps to put an end to the organization once and for all. 

The CFPB today requested that a federal district court enter a final judgment and order to shut down Student Loan Processing.US and refund customers million of dollars.

If approved, the order [PDF] would ban the California-based operation and owner, James Krause, from any future involvement in debt relief and student loan services.

According to the CFPB’s lawsuit [PDF], since 2011, Student Loan Processing.US – a fictitious business name of Irving Web Works, Inc. – along with its owner, allegedly marketed and advertised services to advise and assist borrowers applying for Dept. of Education federal student loan repayment programs.

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.

The company operates websites under the names StudentLoanProcessing.us, StudentLoanProcessing.org, and slpus.org.

Student Loan Processing.US 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, according to the complaint.

Many times the company told consumers that it was a consultation service for the Dept. of Education. The company went so far as to use a logo that 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.

Tuesday’s filing comes after a Feb. 5 court ruling that the defendants violated the Telemarketing Sales Rule by charging customers an advance fee before providing the debt relief service they advertised.

That ruling also found in favor of the CFPB on its claims that the defendants violated the Telemarketing Sales Rule and the Dodd Frank Act’s prohibition against deceptive acts or practices by collecting payment information from customers before disclosing the total cost of the company’s services.

Under the CFPB’s final judgement, Student Loan Processing.US would be ordered to pay over $8.2 million in relief and damages to customers. However, a portion of that would be suspended based on the company’s inability to repay.

The company would also be banned from participating in the debt relief and student loan industries, cancel all contracts with consumers and stop charging them, shut down its operations, and ensure that borrowers do not miss repayment benefits.

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