Attorney General Bob Ferguson announced action against a student loan debt adjusting firm that exploited borrowers for financial gain.
Ferguson filed a lawsuit Monday charging StudentLoanProcessing.US (SLP) and its president James Krause with violating Washington’s Debt Adjusting Act and Consumer Protection Act, including charging illegal fees for debt adjusting and failing to inform customers of important rights as is legally required. The same services SLP offers are available — for free — through the U.S. Dept. of Education (DOE).
“My office will aggressively crack down on those who prey on student loan borrowers — many of whom are already overburdened — for profit,” Ferguson said. “This firm charged exorbitant and illegal fees for services that student loan borrowers can obtain for free.”
Many student loan debt adjustment firms have sprung up as a result of the $1.2 trillion debt burden carried by nearly 40 million American borrowers. Most offer to help students fill out and submit paperwork to DOE to consolidate their federal student loans.
Since July 2011, SLP has marketed and advertised for-cost services to assist student loan borrowers applying for DOE federal student loan repayment programs, including the Income-Based Repayment Program, and Direct Consolidation Loans.
SLP charged each consumer an upfront enrollment fee of $250, or one percent of their outstanding loan balance, whichever was greater. A vast majority of consumers paid more than the $250 enrollment fee, even as high as $2,000. Washington’s Debt Adjustment Act places a strict limit of $25 on initial fees, meaning even SLP’s minimum fee was ten times the legal limit, the Attorney General’s Office alleges.
The Debt Adjustment Act also dictate’s that a debt adjuster’s fee may not exceed 15 percent of each payment, which SLP’s monthly fee of $39 did for most Washington consumers.
The AGO also alleges SLP failed to include language in its contracts informing consumers of their three-day “right to cancel” period, a further violation of the Debt Adjustment Act.
Violations of the Debt Adjustment Act are automatic violations of the Consumer Protection Act.
A total of 88 Washington consumers, with an average student loan debt of approximately $58,000, used SLP’s services. SLP has received roughly $132,000 in fees from these consumers.
The AGO is seeking:
- To void all SLP contracts with Washington consumers;
- Restitution for consumers for all fees paid to SLP;
- An injunction against SLP prohibiting future violations of the Debt Adjustment Act and Consumer Protection Act;
- Payment of $2,000 for each violation of the Consumer Protection Act; and
- Attorney’s costs and fees.
The complaint can be found here.
Assistant Attorneys General John Nelson and Ben Roesch are leads on this case.
Apply for U.S. Department of Education federal repayment programs for free
For most federal borrowers, the consolidation process is fairly straightforward: The borrower fills out a two-page application, verifies his or her employment and income, and submits the package to the DOE. This service is done through the DOE for free and typically takes four to six weeks. Learn more here: www.StudentLoans.gov.
Free student loan debt assistance
Ferguson urges current and former students never to pay upfront for help with student loan debt relief. For information on legitimate sources of free assistance, contact the Consumer Financial Protection Bureau or the National Consumer Law Center.
For problems with your student loan servicer or a debt collector contact the U.S. Department of Education’s Student Loan Ombudsman at 1-877-557-2575 or www.ombudsman.ed.gov, the Consumer Financial Protection Bureau, or file a complaint with the Washington State Attorney General’s Office.