CFPB Warns Borrowers About Companies Charging High Fees for Free Federal Loan Repayment Benefits
WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) took action to put an end to two student “debt relief” scams that illegally tricked borrowers into paying upfront fees for federal loan benefits. The CFPB, in a joint filing with Florida’s Attorney General, shut down student debt relief company College Education Services and separately filed a lawsuit against Student Loan Processing.US for illegally marketing student debt relief services. The Bureau is issuing a consumer advisory today warning student loan borrowers to be wary of paying high fees for free federal loan benefits.
“Student loans are already a significant debt for many Americans. 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,” said CFPB Director Richard Cordray. “When scam artists prey on student loan borrowers, we will take action to halt their illegal activity.”
The U.S. Department of Education offers numerous plans to borrowers with federal student loans to make payments more affordable. These include options that let borrowers set their monthly payment based on their income. Monthly payments under these plans can be as low as zero dollars per month for unemployed or very low-wage borrowers. The Department of Education does not charge any fees to apply for or enroll in these plans, for which many student loan borrowers qualify.
College Education Services Banned from Industry
College Education Services, its owner, Marcia Elena Vargas, and advisor and employee, Frank Liz, marketed and advertised debt relief services to student loan borrowers with loans in default. Based in Tampa, Florida, the company advertised through Internet ads and operated websites including CollegeDefaultedStudentLoan.com and HelpStudentLoanDefault.com. The company reaped millions of dollars in advance fees from thousands of consumers before it ceased operations around February 2013. Specifically, College Education Services:
Charged illegal advance fees: Federal law requires at least one debt to be renegotiated, settled, or reduced before a fee can be collected for debt relief services. But College Education Services charged consumers between $195 and $2,500 and required all, or a substantial portion, of its fees to be paid upfront; the average fee was about $500. The company even took money from financially distressed consumers who could not qualify for loan consolidation, income-driven payment plans, or loan forgiveness programs.
Falsely promised lower payments: Presenting themselves as “counselors,” College Education Services’ telemarketers promised consumers that they could solve all the student loan issues that plagued consumers. Internet ads and telemarketers guaranteed lower monthly payments for consumers. One College Education Services’ ad said, “Cut Your Student Loan Monthly Payment Up to 50% – Save Today!” The company often failed to deliver the promised results. For some consumers who qualified for loan consolidation, College Education Services selected monthly repayment plans that increased their monthly payments.
Falsely claimed quick relief from default or garnishment: The company promised quick relief from default or garnishment. Garnishment is when a court order allows money to be taken from a consumer’s salary, bank account, or other asset when she owes money. But the principal debt relief approach the company used – loan consolidation − did not and could not ensure those benefits in all cases, and not in the quick timeframe the company promised.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Bureau has the authority to take action against companies engaging in unfair, deceptive, or abusive practices. Today, the Bureau asked a federal district court to enter a consent order that would permanently ban College Education Services, Liz, and Vargas from engaging in any debt relief businesses. In addition to the permanent ban, the proposed order requires College Education Services, Vargas, and Liz, to pay a $25,000 civil penalty, which was based on the defendants’ inability to pay a more substantial amount.
I've been receiving the same calls regarding a delinquent student loan, When I started to inquire about this, the lady "BTW voice is very dull and dry" became very rude and responded to me unprofessional. As I went on to try and get an understanding of who they where and why they keep calling me, she then got smart and hung up on me. BR CAREFUL!! I have blocked there number from calling me again...
Alfalfa, Thanks for all the helpful information. I believe when we all received our "Diplomas" the big questions that came with this extremely important Document in our academic life was, "how I can pay my student loans back??????" "what if I can't find a job".......and many other questions. I wish the government can do something about it, to relief some of the big load that each student carry on his or her shoulder....this way we can start our working life fresh and free of dept. I hop!!!
I just received this same voicemail, called back & the lady referred to herself as "student loan." What a moron. I ask her what's student loan and she says they have it on record that my student loan is delinquent. I inform her I have federal loans & they are garnished from my checking account via auto pay every month. Then she has the idiocy to ask me my name. I say, you just told me I was in your system as a delinquent loan so you already know my name - abrupt hang up by her. I call back & get the same lady & ask her if she's aware this number is online as a phone scam number - another abrupt hang up. how do I contact the FBI to report this [***]?
I too received a voicemail from this number. The lady sounded mentally handicapped, really hateful and slurred speech. She said "this is the last time I'm calling you on the delinquent 10,000" whatever that means. I am current on all my student loans. I called her back, she just said "hello, student loan service" and when I said who I was, she just said "yeah?" which was my second red-flag. A legit service will be able to tell you what loan, the balance, the loan number, etc, and won't need to wait on your input. I told her that I am current on all my student loans, she said "oh you are, good" and hung up. Now I have contacted the office of inspector general to the dept of education regarding this, I hope the feds find this moron and throw her in jail. Not even a good actor.