AG also announces multi-state effort on predatory student loan forgiveness
SEATTLE — Attorney General Bob Ferguson today announced that a King County Superior Court judge has ordered a student loan processing company that unlawfully charged borrowers to pay back its Washington victims.
“This firm preyed on students who sought their help, charging exorbitant and illegal fees,” Ferguson said. “In 1995, I graduated from law school owing $100,000 in debt, so I know that paying student loans can be a challenge. I will not tolerate the financial abuse of already overburdened Washington State students.”
Ferguson brought a lawsuit against StudentLoanProcessing.US (SLP) and its president, James Krause, for violating Washington’s Debt Adjustment Act and Consumer Protection Act, by 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. Department of Education (DOE).
In an order dated August 14, Judge Mariane Spearman found the company had violated the law, and ordered full refunds for all its customers, to be distributed through the Attorney General’s Office. While penalties and the state’s attorney’s fees will be determined in further court proceedings, the court found that SLP committed more than 2,700 violations of the Consumer Protection Act, and the Attorney General’s Office has asked the court to impose $129,172 in civil penalties.
A total of 86 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.
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 stopped accepting new Washington consumers in December 2014.
SLP charged each consumer an upfront enrollment fee of $250, or 1 percent of their outstanding loan balance, whichever was greater. A vast majority of consumers paid more than the $250 minimum 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 Debt Adjustment Act also dictates that a debt adjuster’s fee may not exceed 15 percent of each payment, which SLP’s monthly fee of $39 did for many Washington consumers.
SLP also failed to include language in its contracts informing consumers of their rights under Washington law, a further violation of the Debt Adjustment Act.
Violations of the Debt Adjustment Act are automatic violations of the Consumer Protection Act.
Attorney General also calls for federal loan forgiveness for student-victims of predatory for-profit schools
Additionally, Attorney General Ferguson announced today that he joined a group of 11 attorneys general to bring state-level voices to the national discussion on how to help students victimized by Corinthian Colleges and other predatory for-profit schools.
The attorneys general sent a letter calling on the U.S. Department of Education to cancel federal student loans in cases where schools have broken state law, create efficient mechanisms for students seeking relief, and include state attorneys general in the process.
“I’m fighting to get the best help for these students — many of whom are veterans or low-income — who have been victimized by schools that don’t play by the rules,” Ferguson said. “State attorneys general can provide valuable expertise on their states’ laws, ensuring the efficiency and effectiveness of any proposed solutions for victims of these predatory schools.”
Apply for U.S. Department of Education federal repayment programs for free
For most federal borrowers, the process for consolidating loans and applying for income-driven repayment plans 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 at http://www.studentloans.gov/. Income-driven repayment plans allow borrowers to pay a percentage of their discretionary income.
Free student loan debt assistance
Ferguson urges current and former students never to pay up front 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 http://www.ombudsman.ed.gov, the Consumer Financial Protection Bureau, or file a complaint with the Attorney General’s Office.
The Office of the Attorney General is the chief legal office for the state of Washington with attorneys and staff in 27 divisions across the state providing legal services to roughly 200 state agencies, boards and commissions. Attorney General Bob Ferguson is working hard to protect consumers and seniors against fraud, keep our communities safe, protect our environment and stand up for our veterans. Visit www.atg.wa.gov to learn more.
Peter Lavallee, Communications Director, (360) 586-0725; PeterL@atg.wa.gov