In two separate actions Thursday, the CFPB and a group of U.S. Senators turned their attention to debt relief for students struggling to repay loans. The CFPB shut down two student “debt relief” scams while 13 Senators asked the Department of Education to forgive student loans held by companies that break the law.

The CFPB announced that it 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 for illegally marketing student debt relief services.

The Bureau also issued a consumer advisory warning student loan borrowers to be wary of paying high fees for free federal loan benefits.

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 and 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
  • Falsely promised lower payments
  • Falsely claimed quick relief from default or garnishment

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 (UDAAP).  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.

Student Loan Processing.US, a fictitious business name of Irvine Web Works, Inc., is headquartered in Laguna Nigel, California, with an office in Dallas, Texas. The CFPB alleges that since at least July 2011, the company and its owner, James Krause, has been marketing and advertising services to advise and assist borrowers applying for Department of Education federal student loan repayment programs. The company operates websites under the names,, and

In the complaint filed Thursday, the Bureau is accusing the company and Krause of:

  • Falsely representing an affiliation with the U.S. Department of Education
  • Charging illegal advance fees
  • Deceiving borrowers about the costs and terms of its services

Separately from the CFPB and Florida AG actions, a group of 13 Democratic U.S. Senators sent a letter to the Department of Education urging the agency to implement clear policies for using its existing authority to discharge federal student loans for students who attend colleges that break the law. The letter was signed by Senators Warren, Barbara Boxer (D-Calif.), Richard Durbin (D-Ill.), Jack Reed (D-R.I.), Sheldon Whitehouse (D-R.I.), Jeff Merkley (D-Ore.), Al Franken (D-Minn.), Richard Blumenthal (D-Conn.), Brian Schatz (D-Hawaii), Tammy Baldwin (D-Wis.), Christopher Murphy (D-Conn.), Mazie Hirono (D-Hawaii), and Edward Markey (D-Mass.).

In the letter, the senators ask ED to immediately discharge loans for students who attended Corinthian Colleges, Inc. campuses and have legal claims against the school. Corinthian Colleges is currently the subject of lawsuits by the Massachusetts and California state attorneys general and the CFPB, and is under investigation by more than a dozen other state attorneys general for unlawful practices.

The senators also highlighted the importance of strong federal legal protections for borrowers to ensure accountability for schools and for regulators.

In the letter, the senators call on ED to implement clear policies and procedures that put teeth into its existing legal authority to discharge federal student loans when borrowers have legal claims against their schools. The senators wrote, “Without such a process, duplicitous colleges are free to break the law, to suck down billions in federal student loan dollars, to treat students unfairly — and to stick borrowers with the bill. This is exactly what we have seen at Corinthian Colleges.”



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