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On March 15, 2016, the Consumer Financial Protection Bureau (CFPB) announced that it requested a federal court to enter a final order shutting down student debt relief company Student Loan Processing.US.

In December 2014, the CFPB filed a complaint against Student Loan Processing.US and its owner, James Krause, in federal district court in California.  The lawsuit alleges that the defendants charged consumers illegal upfront enrollment fees prior to providing any services, deceived consumers about the cost of services, and falsely represented an affiliation with the Department of Education.  According to the lawsuit, the defendants marketed and sold services promising to advise and assist consumers applying for Department of Education student loan repayment programs.  In return for those services, the defendants charged 1 percent of the consumer’s federal student loan balance plus a monthly maintenance fee of at least $39 per month for the entire repayment term.  The CFPB’s lawsuit accuses the defendants of misrepresenting the amount and duration of the fees they charged.

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

  • Shut down all operations within 45 days of the entry of the court’s judgment;
  • Cancel all contracts with consumers and stop charging fees for services;
  • Pay approximately $326,000 to the CFPB which will be used to compensate affected consumers;
  • Permanently stop directly or indirectly marketing or providing debt relief and student loan services to consumers;
  • Ensure that consumers do not miss recertification or renewal deadlines with the Department of Education; and
  • Pay $1 into the CFPB’s Civil Penalty Fund to permit consumers to seek additional relief in the future.

The CFPB’s March 15 proposed judgment follows a February 5, 2016 court ruling in favor of the CFPB on its claim that the defendants violated the Telemarketing Sales Rule and the Dodd Frank Act’s prohibition against deceptive acts or practices by charging customers an advance fee before providing the debt relief service they advertised.  The CFPB views this ruling as significant and precedent setting, because it establishes that student loan companies can be held responsible for violating federal law if they collect upfront fees in connection with promises to assist consumers in enrolling in Department of Education repayment programs.

Consumers have an estimated $1.3 trillion in total outstanding student loan debt.  Approximately one-in-four student loan borrowers are past due or in default on their student loan.  As such, the CFPB has made it clear that policing the student loan industry will be a priority for the Bureau going forward.  The CFPB’s Student Loan Processing.US consent judgment and its earlier court rulings will likely only further encourage the CFPB to continue its student loan enforcement efforts.  Consequently, companies operating in the student loan market should evaluate the CFPB’s recent student loan-related enforcement actions and guidance and consult with experienced counsel to ensure that they are in compliance.

You can view the CFPB’s proposed final judgment and order here:

You can view the CFPB’s complaint against Student Loan Processing.US here:


Stinson Leonard Street LLP provides sophisticated transactional and litigation legal services to clients ranging from individuals and privately held enterprises to national and international public companies. As one of the 100 largest firms in the U.S., Stinson Leonard Street has offices in 14 cities, including Minneapolis, Mankato and St. Cloud, Minn.; Kansas City, St. Louis and Jefferson City, Mo.; Phoenix, Ariz.; Denver, Colo.; Washington, D.C.; Decatur, Ill.; Wichita and Overland Park, Kan.; Omaha, Neb.; and Bismarck, N.D.

Zane Gilmer is a member of the firm’s litigation practice group.  His practice focuses on business litigation and compliance and he is a member of the firm’s CFPB taskforce.  Zane works out of the firm’s Denver office and he can be reached at or 303.376.8416.

The views expressed herein are the views of the blogger and not those of Stinson Leonard Street or any client.