CFPB Requests Action to Shut Down Student Debt Relief Company Over Illegal Practices

By Brittany Hackett, Communications Staff

The Consumer Financial Protection Bureau (CFPB) on Tuesday requested that a federal district court enter a final judgment and order that would shut down Student Loan Processing.US, a student debt relief company that charged borrowers million of dollars in upfront fees for federal student loan services.

The CFPB filed a lawsuit in December 2014 against the California-based company and its sole owner, James Krause. The lawsuit, filed in a federal district court in California, alleged that the company and Krause charged student loan borrowers illegal upfront enrollment fees before providing services that promised to advise and assist them in applying for Department of Education (ED) student loan repayment programs. The upfront fee was 1 percent of the borrower's federal student loan balance, plus a monthly maintenance fee of at least $39 per month for the entire repayment term of the loan.

The suit also alleged that the company "deceived customers about the costs of their services" by not telling them about the recurring monthly fee or misrepresenting the amount and duration of the fee, according to a CFPB press release. The company also is accused of falsely representing itself as being affiliated with ED.

The proposed judement and order follows a February 5, 2016 court ruling in favor of the CFPB's claim that Student Loan Processing.US and Krause violated the Telemarketing Sales Rule by charging the upfront fee before providing the advertised service, as well as violating the Dodd Frank Act's prohibition against deceptive acts or practices.

The ruling "create[d] an important precedent in the student debt relief market" and "establishes that [such] companies ... may be running afoul of federal consumer financial laws," the CFPB said in a press release.

While ED offers several student loan repayment plans, it does not charge borrowers fees to apply for or enroll in them. In recent months, the Department has been stepping up its efforts to warn borrowers of these kind of scams and increase awareness of the repayment options available to borrowers.

If Tuesday's proposed judgment is approved by the court, Student Loan Processing.US — which also operates under the name IrvineWebWorks, Inc., and runs websites at,, and — and Krause would be banned from any future involvement in debt relief and student loan services. They would also be required to:

  • Shut down all operations within 45 days;
  • Cancel all contracts with borrowers and stop charging them; and
  • Ensure that borrowers receive paperwork for recertification or renewal of their income-driven repayment plans.

The judgment also orders the defendants to pay over $8.2 million in damages and refunds to thousands of borrowers, though CFPB notes that the company’s inability to pay would suspend a "significant portion" of that money. Instead, a payment of about $326,000 would be sent to the CFPB, which it would then distribute among the victims. The company would also be required to pay a civil penalty of at least $1 into the CFPB’s Civil Penalty Fund. By doing so, victims may be eligible for additional relief through the fund in the future.


Publication Date: 3/16/2016

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