AG alleges student loan firm charged illegal fees
OLYMPIA – Attorney General Bob Ferguson is suing a California firm for charging Washington customers “exorbitant and illegal” fees to adjust their student loan debt.
Ferguson filed a lawsuit Tuesday charging Student Loan Processing.US and its owner, James Krause, with violating state laws designed to protect student loan borrowers. The lawsuit claims SLP illegally charged state residents $123,000 to help consolidate their federal student loans.
“My office will aggressively crack down on those who prey on student loan borrowers – many of whom are already overburdened – for profit,” Ferguson said in a statement.
SLP did not immediately return a request for comment Monday. On its website, the company offers to help customers fill out and submit paperwork to the U.S. Department of Education, which offers the same services at no charge.
Attorney General's Office spokeswoman Alison Dempsey-Hall said a consumer filed a complaint with the office about SLP. She said she couldn't confirm or deny an investigation, although the lawsuit references claims within SLP's mailing system that the company works directly with the Department of Education. It does not.
Ferguson's office found SLP charged consumers an up-front fee of $250, or 1 percent of their outstanding loan balance, whichever was greater. Some paid up to $2,000, although state law caps initial fees at just $25.
SLP also charged a $39 monthly fee for all customers, although state law caps monthly fees at 15 percent of a borrower's monthly loan payment. The 88 Washington residents owed an average of $58,000 in student loans, the statement says.
Ferguson wants SLP to void all of its contracts with Washington customers, pay back all of their fees, pay the state $2,000 for each legal violation, and cover attorneys' costs and fees.
Dempsey-Hall said SLP has been notified of the lawsuit and has 60 days to respond.
Many student loan adjustment firms have sprung up in recent years as the nation's student debt skyrocketed to $1.2 million. Roughly 40 million Americans now have at least one outstanding student loan.
SLP, an unofficial business name for Irvine Web Works, Inc., is also being sued by the federal Consumer Financial Protection Bureau. The bureau and the Attorney General's Office urge consumers not to pay up-front for loan adjustment services.