The Consumer Financial Protection Bureau (CFPB) has taken action to stop two college debt relief scams.
The agency said Thursday that it has filed a lawsuit against Dallas-based Student Loan Processing.US and has shut down College Education Services, based in Tampa, for illegally marketing student debt relief services.
{mosads}The CFPB warns student loan borrowers to be wary of paying high fees for free federal loan benefits, as well as when companies ask for a federal student aid PIN number, it says.
“Student loans are already a significant debt for many Americans,” CFPB Director Richard Cordray said. “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.”
College Education Services targeted borrowers with loans already in default through Internet ads and its websites CollegeDefaultedStudentLoan.com and HelpStudentLoanDefault.com.
Consumers, the CFPB said, were falsely promised lower payments and charged up-front fees between $195 and $2,500 for debt relief services, though federal law requires at least one debt be renegotiated, settled, or reduced before a fee is collected.
Student Loan Processing.US charged consumers 1 percent of their federal student loan balance or $250 up-front for services and falsely represented that it was affiliated with the U.S. Department of Education, a news release said.
“When student loan servicing fails to work, vulnerable borrowers are tempted to respond to enticing ads offering relief that does not materialize,” the U.S. Treasury Department’s Deputy Secretary Sarah Bloom Raskin said in a statement.
“Firms offering this “relief” pose serious threats to consumer protection because they engage in questionable practices and charge egregious and unnecessary fees.”