Skip to content

Student loan debt relief scheme to be shut down

Laguna Nigel, CA
Fine Amount: 
$1 and refunds
Penalty Type: 
Issued by: 

The Consumer Financial Protection Bureau (CFPB) announced March 15, 2016, that it has requested that a federal district court enter a final judgment and order that would shut down a student debt relief scheme that charged borrowers millions of dollars in illegal upfront fees for federal student loan services. If approved by the court, the proposed judgment would ban the company, Student Loan Processing.US, and its sole owner, James Krause, from any future involvement in debt relief and student loan services. The order would also require the company to pay refunds to thousands of harmed consumers and a civil money penalty of at least $1.

In December 2014, the CFPB filed a lawsuit against Student Loan Processing.US and Krause in federal district court in California alleging that the defendants charged consumers illegal upfront enrollment fees before providing any services, deceived customers about the costs of their services, and falsely represented an affiliation with the Department of Education.

If the proposed final judgment and order is entered by the court, Student Loan Processing.US and Krause must:

  • Shut down illegal operations
  • Cancel all contracts with consumers and stop charging them
  • Pay consumer refunds: The order imposes a judgment for relief and damages to consumers of over $8.2 million. A significant portion of that payment, however, is suspended based on the defendants’ inability to pay. Under the terms of the order, a payment of approximately $326,000 would be sent to the Bureau and would be distributed to compensate victims of the defendants’ illegal activities.
  • Stop participating in the debt relief and student loan industries
  • Pay a civil penalty: The order also imposes a penalty of at least $1 to be paid into the CFPB’s Civil Penalty Fund. By requiring the defendants to pay a penalty of at least $1, victims of the defendants’ illegal practices may be eligible for additional relief from the CFPB Civil Penalty Fund in the future, although that determination has not yet been made. The Bureau is seeking this nominal penalty because of the defendants’ limited financial resources.

The court ruled on February 5, 2016, in favor of the CFPB's claim that the defendants violated the FTC's Telemarketing Sales Rule by charging an advance fee, and it claim that the defendants violated by the Telemarketing Sales Rule and the Dodd Frank Act's UDAAP prohibitions by collecting payment information from consumers before disclosing the costs of the company's services.

Penalties View All

Banker Store View All

From training, policies, forms, and publications, to office products and occasional gifts, it’s available here:

Banker Store

hot right now

image description

Looking for effective, convenient training on a particular subject?

BOL Learning Connect offers more than 200 courses ON-DEMAND or on CD ROM from AML to Reg Z and every topic in between.

Search Penalties