On December 11, the CFPB announced lawsuits against two student loan debt relief companies alleged to have deceived borrowers into paying upfront fees for federal student loan repayment benefits that are available for free.

The action against College Education Services LLC and its individual owners, which was filed jointly by the CFPB and the Florida Attorney General in a Florida federal district court, alleged that the company violated the Telemarketing Sales Rule (TSR), the Consumer Financial Protection Act (CFPA) prohibition of unfair, deceptive or abusive acts or practices and the Florida Deceptive and Unfair Trade Practices Act.  The defendants’ alleged conduct included charging unlawful advance fees, falsely promising lower payments, and falsely claiming quick relief from default or garnishment.  The basis for the charge that the defendants made false claims of quick relief was that debt consolidation, the principal debt relief approach used, did not and could not ensure such quick relief in all cases and not in the short timeframe promised.

Simultaneously with filing the complaint, the CFPB and Florida AG submitted a proposed consent order to the court that would permanently ban the defendants from offering or providing any debt relief service or assisting any person offering such service.  The consent order also would require the defendants to pay a $25,000 civil money penalty to the CFPB.  (The CFPB stated in its press release that the penalty amount was based on the defendants’ inability to pay a more substantial amount.)

The second action was filed by the CFPB against Student Loan Processing.US (a fictitious business name of Irvine Web Works, Inc.) and its individual owner in a California federal district court.  The complaint alleges that the defendants violated the TSR and CFPA by conduct that included falsely representing an affiliation with the U.S. Department of Education, charging unlawful advance fees, and deceiving borrowers about the costs and terms of the company’s services.  The complaint seeks an injunction barring future TSR and CFPA violations by the defendants, restitution to harmed consumers, and civil money penalties.

Given the vulnerability of those student loan borrowers who really are struggling with their debts, we were glad to see that the CFPB’s announcement of the lawsuits was accompanied by the issuance of a consumer advisory warning consumers about student debt relief scams.