WASHINGTON, March 17 (UPI) -- A consumer watchdog group recommended a student loan debt relief company accused of preying on student loan borrowers be shuttered and the company reimburse thousands of borrowers who paid some $8.2 million in illegal fees.
The Consumer Financial Protection Bureau requested a federal court enter a final judgement against Student Loan Processing.US and the company's owner, James Krause, be banned from any future involvement in debt relief and student loan services.
"I applaud today's announcement by the Consumer Financial Protection Bureau that it has taken action to shut down Student Loan Processing, a company that was charging borrowers exorbitant fees for services they can access for free through studentloans.gov or by calling their servicers," Education Secretary John B. King, Jr., said. "We are working with the CFPB to make sure these borrowers know where to go to get help enrolling in an income driven repayment plan or consolidating their loans, for free."
The proposed order asks for $326,000 to compensate borrowers, a significantly lower amount than the company collected because Krause cannot afford to pay the $8.2 million in damages. Krause was also ordered to pay $1 to the CFPB's Civil Penalty Fund, opening the fund to the company's victims for possible future compensation.
Student Loan Processing joins several other student loan debt relief companies that have come under fire from state and federal regulators. With official-looking websites and professional-sounding sales pitches, the companies dupe borrowers into thinking they're getting a special deal on student-loan paybacks. Instead, the companies charge fees for services that are free through the Department of Education.
In December 2014, the CFPB accused Student Loan Processing of violating federal consumer financial laws, charging illegal upfront fees, deceiving consumers about the costs of their services and falsely representing an affiliation with the U.S. Department of Education. The company charged an enrollment fee of about $250 and a $39 monthly maintenance fee for providing benefits that are free through the Department of Education.
"During initial enrollment calls with customers, the company's representatives failed to disclose the recurring monthly fee before collecting payment information from the customer," the CFPB said.