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Illegal Student Loan Debt Scheme Shut Down

The Consumer Financial Protection Bureau has asked that a final judgment and order be entered by federal district court that would shut down a harmful student debt scheme. It has been alleged that Student Loan Processing has charged borrowers millions of dollars in illegal upfront fees for federal student loan services. According to CFPB Director Richard Cordray, “Student Loan Processing US and its owner, James Krause, preyed upon students looking for loan repayment help and fleeced them out of millions.”

Student Loan Processing is headquartered in Laguna Nigel, California. The company also has an office in Dallas, Texas. The company’s customers are located throughout the United States. Student Loan processing had done business under the name Student Loan Processing US since 2011. It ran a website that advertised that the company “worked together with the Department of Education” when, in fact, it was not officially affiliated with it. Since 2001, SLP has charged enrollment fees for its services, which it charges consumers in the form of a recurring monthly fee. Enrollment typically took place over the phone and payment of the fee was due before the consumer was enrolled. The fee was at least $39 a month fot the entire repayment term of the borrower’s federal student loan.

The lawsuit against SLP was filed by the CFPB in December 2014 in the federal district court of California. The CFPB alleged in its complaint that the defendants “charged consumers illegal upfront enrollment fees before providing any services, deceived customers about the costs of their services, and falsely represented an affiliation with the Department of Education.” The complaint charged the Defendants with: (1) abusive telemarketing act or practice related to advance fees; (2) creating the false impression that defendants were affiliated with, endorsed by, or sponsored by the Department of Education; (3) failing to adequately disclose the monthly maintenance fee and obscuring the total cost of the service; and (4) violating the Consumer Protection Act Section 5536(a)(1)(B).

If the judgment is entered by the court SLP must shut down all illegal operations within 45 days of the entry of the court’s judgment and stop participating in the debt relief and student loan industries. SLP would be required to immediately stop charging consumers fees for its services and void all contracts with its customers. Additionally, SLP would be required to pay damages in the amount of $8.2 million. However, due to defendants’ inability to pay, a payment of approximately $326,000 is to be sent to the CFPB to be distributed to those harmed by the defendants’ illegal activities. The company must also ensure that student loan borrowers do not miss important repayment benefits and must inform the customers of the steps that must be taken to remain enrolled in the Department of Education’s student loan repayment programs.

http://www.consumerfinance.gov/newsroom/cfpb-takes-action-to-shut-down-illegal-student-debt-relief-scheme/

Categories: CFPB
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