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Borrower Beware: Student Loan Processing.US

Loans, Student Loans

This company is on the NerdWallet Student Loan Watch List. The list flags student-loan businesses and individuals hit by enforcement actions, court judgments or liens, or bad ratings from the Better Business Bureau. Learn more in Who Gets Listed.

A federal judge ordered the shutdown of Student Loan Processing.US in 2016, after U.S. officials accused the California company of charging borrowers millions of dollars in illegal upfront fees for government student-loan services.

The federal Consumer Financial Protection Bureau sued the company and its owner, James Krause, in 2014, alleging they charged consumers illegal upfront fees, deceived customers about the costs of their services and falsely represented an affiliation with the U.S. Education Department.

The suit ended with a stipulated final judgment and order, signed by a U.S. District Court judge, that banned Krause and the company, also known as IrvineWebWorks Inc., from any future involvement in “debt relief” and student loan services.

The order required the company to pay $8.2 million for penalties and refunds to thousands of consumers. But the judge suspended most of the payment because of the defendants’ inability to pay. Ultimately Krause and his companies were required to pay $326,000 for compensation of consumers.

“Student Loan Processing.US and its owner, James Krause, preyed upon students looking for loan repayment help and fleeced them out of millions,” CFPB Director Richard Cordray said in a news release announcing the suit’s resolution. “The Bureau is taking action to shut down the unlawful operation permanently and to prevent the company and its owner from participating in the student lending and debt relief industries ever again.”

Under terms of the final judgment and order, Krause and his companies did not admit any of the allegations made by the consumer agency.

CFPB officials said the ruling created an important precedent by establishing that companies offering to enroll student-loan borrowers in Education Department repayment programs may break the law if they collect upfront fees, or don’t clearly disclose all fees before consumers supply any payment account information.

The states of Washington and Massachusetts also took actions against the companies for a variety of legal violations.

Enforcement Actions:

  • The CFPB sued Student Loan Processing.US, IrvineWebWorks Inc., and founder and president Krause, alleging they charged consumers illegal fees, deceived people about the costs of services and falsely claimed affiliation with the Education Department. Under the settlement terms, Student Loan Processing.US agreed to shut down all student debt operations, cancel all contracts with consumers and stop charging consumers fees.
  • In an agreement with the Massachusetts attorney general in 2015, Student Loan Processing.US consented to pay $56,000 and to cease operations and advertising in the state. The attorney general’s allegations included charging illegal upfront fees prior to delivering full and complete services, aggressive marketing practices, and misleading borrowers about the company’s ability to arrange lower monthly payments for their loans.
  • A Washington court, acting on a lawsuit filed by the state attorney general against Student Loan Processing.US and Krause, found the company had charged excessive fees, debited its customers’ bank accounts for payments on voided contracts and failed to make legally required disclosures in its contracts. The company refunded about $115,000 to Washington borrowers, according to a 2017 news release issued by the state attorney general.

At the time of this Watch List posting, the Better Business Bureau had given Student Loan Processing.US an “F” rating.

What the company claims to provide: Advice and assistance to student loan borrowers applying for U.S. Department of Education federal student loan repayment programs and assisting borrowers with student loan debt management

Based: Laguna Niguel, California, with other offices in California and Texas

Management: James Krause, founder and owner

Sources: Consumer Financial Protection Bureau, Washington court records, California federal court records, Massachusetts attorney general, Washington attorney general, Better Business Bureau