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Two firms accused of offering false hope to student loan borrowers seeking lower monthly payments or other debt relief have been sued by the Consumer Financial Protection Bureau, the agency announced Thursday.
According to the bureau, both firms “tricked” consumers into paying upfront fees to access federal loan benefits, which in many cases were free.
A Florida-based company named College Education services reaped “millions of dollars in advance fees” while operating websites like CollegeDefaultedStudentLoan.com and HelpStudentLoanDefault.com, the bureau said, including promises like “Cut Your Student Loan Monthly Payment Up to 50% – Save Today!” Fees ranged from $195 to $2,500, and generally, were paid upfront, a violation of federal law. In a settlement, the sites’ operators were banned from engaging in any debt relief business, and paid a civil penalty. The websites ceased operation last year.
In a separate case, the bureau sued a California firm operating with the name “Student Loan Processing,” promising to help borrowers applying for Department of Education repayment programs. In a complaint filed Thursday in California federal court, the bureau seeks an injunction to halt operation of the firm’s various websites, including StudentLoanProcessing.us, StudentLoanProcessing.org, and slpus.org. The bureau alleges that the firm uses logos that make it appear to be affiliated with the U.S. government, that it charges illegal advance fees, and charges consumers surprise monthly fees that can last years or even decades.
A spokesperson for Student Loan Processing told Credit.com that the company was not expecting action from the bureau: “SLP has cooperated with the CFPB investigators for more than a year, and we are surprised they are proceeding with this action. Without our help, most of our clients would not even be aware that the Department of Education student loan consolidation programs exist. … We stand by our services, and we look forward to our day in court.”
The CFPB said it will work to halt any illegal activity by student loan programs like these.
“Student loans are already a significant debt for many Americans. College Education Services and Student Loan Processing.US added to that hardship by taking advantage of troubled borrowers and failing to describe their services honestly,” said CFPB Director Richard Cordray. “When scam artists prey on student loan borrowers, we will take action to halt their illegal activity.”
Other allegations against Student Loan Processing include:
The CFPB also announced an advisory on Thursday to student loan borrowers seeking relief from high monthly payments and loan balances. More than 7 million student loan borrowers are now in debt, the agency said. In particular, it warned borrowers to watch for:
Dealing with your student loan debt is difficult enough when you’re not keeping your guard up for debt relief scams. If you’re struggling to make your student loan payments, you can always consider student loan consolidation in addition to income-based repayment and other repayment programs. Keep in mind that consolidating student loans will most likely require a credit check if you’re going through a private lender, so it’s important to maintain good credit so you can keep this option open. You can check two of your credit scores for free on Credit.com to see where you stand.
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