CFPB: Student Loan Debt-Relief Companies Charged Illegal Upfront Fees

CFPB: Student Loan Debt-Relief Companies Charged Illegal Upfront Fees
December 12, 2014

Two student loan debt relief companies illegally tricked borrowers into paying illegal upfront fees for federal loan benefits, said the Consumer Financial Protection Bureau (CFPB).

A joint filing between the agency and the Florida Attorney General shut down College Education Services and filed a lawsuit against student loan Processing US.

Based in Tampa, Fla., College Education Services marketed and advertised debt relief services to student loan borrowers with loans in default. The company advertised its services online using the websites and

Federal law requires that fees for debt relief services can only be collected after at least one debt has been renegotiated, settled or reduced. The company, however, charged borrowers between $195 and $2,500 in fees before providing any debt relief services.

College Education Services also falsely advertised guaranteed lower monthly payments, but either failed to lower payments or enrolled borrowers into repayment plans that increased their monthly payments. These loan consolidations did not provide relief from wage garnishment, another false promise from the company.

Although the company made millions from the scam, the owners of the business will only be required to pay a $25,000 civil penalty due to their inability to pay a more substantial amount. They are also banned from engaging in any future debt relief businesses.

Student Loan Processing Lawsuit

The CFPB also filed a lawsuit against the owners of student loan Processing U.S. which has been marketing and advertising services to advise and assist borrowers in applying for repayment programs through the Department of Education. The company operates websites under the names,, and

According to the CFPB complaint the company falsely represented itself to be affiliated with the Department of Education.

Like College Education Services, it also charged upfront fees before providing any services. In this case, the company charged 1 percent of the borrower's federal student loan balance or $250, whichever is higher, to be enrolled in the programs. The company also charged a monthly $39 service fee until the debt is paid off, which could be decades. The company failed to disclose the fee, even to those borrowers that qualified for zero payments under the federal programs.