IrvineWebWorks, Inc. d/b/a Student Loan Processing. US, et al.

Agency: Consumer Financial Protection Bureau
Date: Dec. 2014
Type: enforcement action
Source: consumerfinance.gov/enforcement/actions/irvinewebworks-student-loan-pr
Pages: 60
PDFs: 3 documents (links below)

Documents in this case

Stipulation · 21 p.
Complaint · Dec. 2014 · 17 p.
Stipulation · Mar. 2016 · 21 p.

Case summary

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.

Stipulation

PDF of this document (21 pages)

Page 2

RINA TUCKER HARRIS, DC Bar #444550 (Pro Hac Vice) (Email: [email protected]; Phone: 202-435-9196) NICHOLAS JABBOUR, DC Bar #500626 (Pro Hac Vice) (Email: [email protected]; Phone: 202-435-7508) BRANDIS C. ANDERSON, CA Bar #261325 (Email: [email protected]; Phone: 202-435-7548) Enforcement Attorneys Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722

Attorneys for Plaintiff Consumer Financial Protection Bureau

JEFFREY C. BRIGGS, CA Bar #100369 (Email: [email protected]; Phone: 323-461-5400) Briggs Law Office 6464 Sunset Blvd., Ste. 715 Hollywood, CA 90028 Fax: 323-908-7275

Attorney for Defendants IrvineWebWorks, Inc., dba Student Loan Processing.US, and James Krause

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION

Consumer Financial Protection Bureau,

Plaintiff,

IrvineWebWorks, Inc. d/b/a Student Loan Processing.US, et al.,

Defendants.

Case No. SACV14-1967-JVS (DFMx)

STIPULATED FINAL JUDGMENT AND ORDER

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Plaintiff Consumer Financial Protection Bureau (Bureau) commenced this civil action on December 11, 2014 against Defendants IrvineWebWorks, Inc. d/b/a Student Loan Processing.US and James Krause to obtain injunctive relief, a civil penalty, and other relief. The Complaint alleges violations of the Telemarketing Sales Rule (TSR), 16 C.F.R. part 310, and sections 1031 and 1036 of the Consumer Financial Protection Act of 2010 (CFPA), 12 U.S.C. §§ 5531(a), 5536(a)(1), in connection with Defendants’ alleged marketing and sale of student loan debt relief services and the charging of advance fees. The Bureau moved for summary judgment against Defendants on December 28, 2015. (Docket No. 34). Defendants moved for partial summary judgment on Count I of the Complaint on the same date. (Docket No. 33). On February 5, 2016, the Court granted the Bureau’s motion for summary judgment on Count I of the Complaint, and granted in part the Bureau’s motion for summary judgment on Counts III and V of the Complaint. (Docket No. 59, MSJ Order). The Parties then commenced settlement discussions with the assigned Magistrate Judge. The Parties, by and through their respective counsel, now jointly request that the Court enter this Stipulated Final Judgement and Order (Final Order). I.

FINDINGS 1.

The Court has jurisdiction over the Parties and the subject matter of this action.

The Parties agree to entry of this Final Order, without adjudication of the remaining issues of fact or law pleaded in the Complaint, to settle and resolve all matters in dispute arising from the conduct alleged in the Complaint to the date this Final Order is entered.

Defendants neither admit nor deny any allegations in Complaint, except as stated in this Final Order. For purposes of this Final Order, Defendants admit the facts necessary to establish the Court’s jurisdiction over them and the subject matter of this action.

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Defendants admit that defendant James Krause is a “related person” as defined by the CFPA.

The Court found that the evidence accepted on summary judgment established that defendant IrvineWebWorks, Inc. d/b/a Student Loan Processing.US’s services are “debt relief services” as defined by the TSR. 6.

The Court found that the evidence accepted on summary judgment established that Defendants requested and received a fee or consideration that violated 16 C.F.R. § 310.4(a)(5)(i). MSJ Order at 8-13. 7.

The Court found that the evidence accepted on summary judgment established that Defendants failed to disclose truthfully, in a clear and conspicuous manner, the total costs to purchase, receive, or use their student loan services before a consumer consented to pay for those services as defined by and in violation of 16 C.F.R. § 310.3(a)(1)(i) and the CFPA. MSJ Order at 16-21. 8.

Defendants waive service under Rule 4(d) of the Federal Rules of Civil Procedure and waive all rights to seek judicial review or otherwise challenge or contest the validity of this Final Order. Defendants also waive any claims that they may have under the Equal Access to Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action to the date of this Final Order. Each party will bear its own costs and expenses, including, without limitation, attorneys’ fees.

Entry of this Final Order is in the public interest. II.

DEFINITIONS The following definitions shall apply to this Final Order: 10.

“Advance Fee” means any fee or consideration requested or received from a consumer, in connection with telemarketing, by an entity, whether directly or indirectly, that occurs before:

a. That entity has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 3 of 21 Page ID #:2301

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agreement, debt management plan, or other such valid contractual agreement executed by the consumer; b. The consumer has made at least one payment pursuant to that settlement agreement, debt management plan, or other valid contractual agreement between the consumer and the creditor or debt collector; and c. To the extent that debts enrolled in a service provided by the entity are renegotiated, settled, reduced, or otherwise altered individually, the fee or consideration either (1) bears the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount; or (2) is a percentage of the amount saved as a result of the renegotiation, settlement, reduction, or alteration. 11.

“Affected Consumer” means any consumer who paid any money to Student Loan Processing.US for Student Loan Services pursuant to any agreement entered into on or before the Effective Date. 12.

“Debt Relief Service” means any program or service represented, directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or other terms of the debt between a consumer and one or more unsecured creditors or debt collectors, including, but not limited to, a reduction in the balance, interest rate, or fees owed by a consumer to an unsecured creditor, even if such program or service actually involves only the consolidation and/or refinancing of existing debt.

13.

“Defendants” shall mean Student Loan Processing.US and Krause, individually, collectively, or in any combination. 14.

“Effective Date” means the date on which the Final Order is entered by the Court.

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15.

“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate. 16.

“Krause” means James Krause, as well as his successors and assigns. 17.

“Monthly Maintenance Fee” means any recurring monthly fee charged by Student Loan Processing.US for its Student Loan Services. 18.

“Related Consumer Action” means a private action by or on behalf of one or more consumers or an enforcement action by another governmental agency brought against one or both Defendants based on substantially the same facts as this matter.

19.

“Student Loan Processing.US” means IrvineWebWorks, Inc. d/b/a Student Loan Processing.US, as well as its successors and assigns. 20.

“Student Loan Service” means any program, product, or service marketed, offered, provided, administered, or sold related to student loans. III.

ORDER A. CONDUCT PROHIBITIONS AND INJUNCTIVE RELIEF IT IS HEREBY ORDERED as follows:

21.

Defendants and their officers, agents, directors, and employees, whether acting directly or indirectly, must immediately cease and desist from any violation of the TSR and sections 1031 and 1036 of the CFPA. 22.

All agreements related to Student Loan Services entered into up to and including the date of the entry of this Final Order between any consumers and Defendants (including any service agreement or power of attorney designation) are rescinded, and shall be null and void effective immediately. 23.

Defendants and their officers, agents, directors, and employees, whether acting directly or indirectly, shall immediately cease assessing any fees on any consumers pursuant to the agreements described in the preceding Paragraph. 24.

Within 10 days of the Effective Date, Defendants must provide to the Bureau, via a secure method of transmission, a report containing the following Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 5 of 21 Page ID #:2303

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information for each Affected Consumer: (a) the consumer’s name, Social Security number, postal address, phone number, and email address; (b) the name of any U.S. Department of Education repayment programs or plans in which the Affected Consumer is enrolled as of the date on which the report is generated; (c) if the Affected Consumer is enrolled in any income-driven repayment or forgiveness plan offered by the U.S. Department of Education, the Affected Consumer’s recertification or renewal deadline within the next 12 months; (d) the Affected Consumer’s Federal student loan servicer; (e) the address on file for the Affected Consumer with the Affected Consumer’s Federal student loan servicer; (f) the date on which the consumer enrolled with Defendants for Student Loan Services; (g) all enrollment fees, monthly maintenance fees, and other fees paid by the consumer to Defendants; and (h) any refunds provided to the consumer (including the amount of each refund, the date of each refund, and the reason for each refund), excluding any refunds provided by the Washington Attorney General’s Office and the Massachusetts Attorney General’s Office related to Defendant’s Student Loan Services.

25.

Within 30 days of the Effective Date, Defendants shall contact all consumer reporting agencies to which they have supplied or asked to be supplied negative or derogatory information concerning any consumer who enrolled with Student Loan Processing.US, if any, and take all steps necessary to have this negative or derogatory information removed for such consumers. 26.

Within 45 days of the Effective Date, Defendants shall permanently cease all operations of Student Loan Processing.US, including all operations by which Student Loan Processing.US markets, offers, provides, administers, or sells Student Loan Services. Without limiting the foregoing, during the 45-day time period during which Defendants are undertaking actions to permanently cease operations of Student Loan Processing.US, Defendants shall: Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 6 of 21 Page ID #:2304

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a. Not enroll any new consumers with Student Loan Processing.US. To the extent that any consumer submits paperwork or other documentation seeking to enroll with Student Loan Processing.US, Defendants shall promptly return that paperwork and documentation and notify the consumer that Student Loan Processing.US is ceasing operations; b. For any Affected Consumer enrolled in any income-driven repayment or forgiveness plan offered by the U.S. Department of Education whose annual recertification or renewal deadline occurs within the 30-day time period following the Effective Date, prepare, process, and mail any paperwork required for the Affected Consumer to maintain enrollment in the plan; and c. Send or make any routine reminders or notifications to Affected Consumers regarding recertification or renewal deadlines for income-driven repayment or forgiveness plans offered by the U.S. Department of Education that Defendants would otherwise send or make during the 30-day time period following the Effective Date.

27.

Nothing in Paragraph 26 shall limit or affect Defendants’ ability to: a. Comply with any provision of this Final Order; b. Send to each Affected Consumer who requests it, and to the extent not already done, via a secured method of electronic transmission or via postal mail, copies of all paperwork filed on the consumer’s behalf with the U.S. Department of Education or the consumer’s student loan servicer; or c. Forward to any Affected Consumer any mail addressed to any Affected Consumer that is received by Defendants. Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 7 of 21 Page ID #:2305

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28.

Except to the extent provided in Paragraphs 26 and 27, Defendants, whether acting directly or indirectly, are permanently restrained and enjoined from: a. Advertising, marketing, promoting, offering for sale, selling, or providing any Debt Relief Service or Student Loan Service; b. Assisting any person advertising, marketing, promoting, offering for sale, selling, or providing any Debt Relief Service or Student Loan Service; or c. Receiving any remuneration or other consideration from, holding any ownership interest in, providing services to, or working in any capacity for any person engaged in or assisting in advertising, marketing, promoting, offering for sale, selling, or providing any Debt Relief Service or Student Loan Service. 29.

Within 30 days of the Effective Date, Defendants will cause the written notice concerning this Final Order attached hereto as Exhibit A to be sent to all Affected Consumers by first class postal mail, address correction service requested. No other materials shall be transmitted with the notice. B. MONETARY PROVISIONS

IT IS FURTHER ORDERED that:

30.

A judgment for equitable monetary relief and damages is entered in favor of the Bureau and against the Defendants, in the amount of $8,249,548.48, for the purpose of providing redress to Affected Consumers; however, full payment of this judgment will be suspended upon satisfaction of the obligations in Paragraph 31 of this Section and Paragraph 40 of Section D, and subject to Section C of this Final Order.

31.

Within 10 days of the Effective Date, Defendants must pay to the Bureau, by wire transfer to the Bureau or to the Bureau’s agent, and according to the Bureau’s wiring instructions, $326,000, toward satisfaction of the judgment ordered in Paragraph 30.

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32.

With regard to any money that Defendants pay under this Section, if Defendants receive, directly or indirectly, any reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, or if Defendants secure a tax deduction or tax credit with regard to any federal, state, or local tax in respect of any money that Defendants pay under this Section (Additional Payment), Defendants must: (a) immediately notify the Bureau’s Enforcement Director in writing, and (b) within 10 days of receiving the Additional Payment, Defendants must transfer to the Bureau the full amount of such Additional Payment to the Bureau or to the Bureau’s agent according to the Bureau’s wiring instructions. After the Bureau receives the Additional Payment, that payment will be applied toward the judgment entered in Paragraph 30, and the amount of the suspended judgment referenced in Paragraph 30 will be reduced by the amount of the Additional Payment.

33.

Any funds received by the Bureau in satisfaction of this judgment will be deposited into a fund or funds administered by the Bureau or the Bureau’s agent according to applicable statutes and regulations to be used for redress for Affected Consumers, including, but not limited to, refund of moneys, restitution, damages, or other monetary relief, and for any attendant expenses for the administration of any such redress.

34.

If the Bureau determines, in its sole discretion, that redress to consumers is wholly or partially impracticable or if funds remain after redress is completed, the Bureau will deposit any remaining funds in the U.S. Treasury as disgorgement. Defendants will have no right to challenge any actions that the Bureau or its representatives may take under this Section. 35.

Payment of redress to any Affected Consumer under this Final Order may not be conditioned on that Affected Consumer waiving any right. C. EFFECT OF MISREPRESENTATION OR OMMISSION REGARDING FINANCIAL CONDITION Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 9 of 21 Page ID #:2307

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IT IS FURTHER ORDERED that:

36.

The Bureau’s agreement to entry of this Final Order is expressly premised on the truthfulness, accuracy, and completeness of the forms titled “Consumer Financial Protection Bureau: Financial Statement of Individual Defendant,” “Consumer Financial Protection Bureau: Financial Statement of Corporate Defendant,” and supporting documents submitted to the Bureau on or about March 1, 2016 and March 2, 2016 (collectively, Financial Statements), which Defendants certified under penalty of perjury. 37.

If the Bureau in its sole discretion determines that Defendants have failed to disclose any material asset or that any of its Financial Statements contain any material misrepresentation or omission, including materially misstating the value of any asset, then the suspension of the monetary judgment entered in Section B will be terminated, and the Bureau can seek to enforce in any appropriate Federal district court as immediately due and payable the full judgment entered in Section B of this Final Order, $8,249,548.48, less any amounts paid under Section B of the Final Order.

38.

After the reinstatement of the monetary judgment under this Section, the Bureau will be entitled to interest on the judgment, computed from the date of entry of this Final Order, at the rate prescribed by 28 U.S.C. § 1961, as amended, on any outstanding amounts not paid.

D. CIVIL MONEY PENALTY IT IS FURTHER ORDERED that:

39.

Under Section 1055(c) of the CFPA, 12 U.S.C. § 5565(c), by reason of the violations of law described in the Complaint and continuing to the entry of this Final Order, and taking into account the factors in 12 U.S.C. § 5565(c)(3), Defendants must pay a civil money penalty of at least $1 to the Bureau, but no more than $1 plus any amount due under Paragraph 42 of this Section. Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 10 of 21 Page ID #:2308

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40.

Within 10 days of the Effective Date, Defendants must pay $1 of the civil money penalty referred to in Paragraph 39 by wire transfer to the Bureau or the Bureau’s agent in compliance with the Bureau’s wiring instructions. 41.

Defendants must set aside $129,000 for use only to pay reasonable expenses to permanently cease operations of Student Loan Processing.US as set forth in Paragraph 26. Defendants must provide to the Bureau a detailed accounting of how such funds were used within 7 days after operations of Student Loan Processing.US are ceased, and again after existing rent obligations for Student Loan Processing.US are satisfied. If Defendants do not incur reasonable expenses amounting to the full $129,000 to permanently cease operations and to satisfy the existing rent obligations of Student Loan Processing.US, the remaining balance must be paid to the Bureau as a civil money penalty in addition to the $1 required under Paragraph 40. In addition, if the Bureau makes a determination that any portion of the $129,000 was not expended in a reasonable manner, the Bureau shall be entitled to demand payment of that portion of the $129,000 as a civil money penalty in addition to the $1 required under Paragraph 40. 42.

Within 10 days after the Bureau has indicated that it has completed its review of the accounting specified in Paragraph 41, Defendants must pay any unused portion of the $129,000 that was set aside to cease operations, as well as any amounts determined not to have been expended in a reasonable manner, by wire transfer to the Bureau or the Bureau’s agent in compliance with the Bureau’s wiring instructions.

43.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

44.

Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not:

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a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order.

b. Seek or accept, directly or indirectly, reimbursement or indemnification from any source, including but not limited to payment made under any insurance policy, with regard to any civil money penalty paid under this Order.

45.

To preserve the deterrent effect of the civil money penalty in any Related Consumer Action, Defendants may not argue that Defendants are entitled to, nor may Defendants benefit by, any offset or reduction of any monetary remedies imposed in the Related Consumer Action because of the civil money penalty paid in this action or because of any payment that the Bureau makes from the Civil Penalty Fund (Penalty Offset). If the court in any Related Consumer Action grants such a Penalty Offset, Defendants must, within 30 calendar days after entry of a final order granting the Penalty Offset, notify the Bureau, and pay the amount of the Penalty Offset to the U.S. Treasury. Such a payment will not be considered an additional civil money penalty and will not change the amount of the civil money penalty imposed in this action.

46.

The facts alleged in the Complaint establish all elements necessary to sustain an action by the Bureau under Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A). For such purposes, this Order will have collateral estoppel effect against Krause, even in Krause’s capacity as debtor-in-possession. 47.

The civil penalty imposed by the Order represents a civil penalty owed to the United States Government, is not compensation for actual pecuniary loss, and thus, as to Krause, is not subject to discharge under the Bankruptcy Code under 11 U.S.C. § 523(a)(7).

E. OTHER MONETARY PROVISIONS IT IS FURTHER ORDERED that:

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48.

In the event of any default on Defendants’ obligations to make payment under this Final Order, interest, computed under 28 U.S.C. § 1961, as amended, will accrue on any outstanding amounts not paid from the date of default to the date of payment, and will immediately become due and payable. 49.

Defendants must relinquish all dominion, control, and title to the funds paid under this Final Order to the fullest extent permitted by law, and no part of the funds may be returned to Defendants.

50.

Under 31 U.S.C. § 7701, Defendants, unless they already have done so, must furnish to the Bureau their taxpayer identifying numbers, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Final Order.

51.

Under Section 604(a)(I) of the Fair Credit Reporting Act, 15 U.S.C.§ 168l b(a)(1), any consumer reporting agency may furnish a consumer report concerning any Defendant to the Bureau, which may be used for purposes of collecting and reporting on any delinquent amount arising out of this Order. 52.

Within 30 days of the entry of a final judgment, consent order, or settlement in a Related Consumer Action, Defendants must notify the Bureau of the final judgment, consent order, or settlement in writing. That notification must indicate the amount of redress, if any, that Defendants paid or are required to pay to consumers and describe the consumers or classes of consumers to whom that redress has been or will be paid.

F. REPORTING REQUIREMENTS

IT IS FURTHER ORDERED that:

53.

Each Defendant must notify the Bureau of any development that may affect compliance obligations arising under this Final Order, including but not limited to, the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this Final Order; the filing of any bankruptcy or insolvency proceeding by or against Defendants; or a change in Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 13 of 21 Page ID #:2311

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Defendants’ names or addresses. Each Defendant must provide this notice, if practicable, at least 30 calendar days before the development but in any case no later than 14 days after the development. 54.

Within 10 days of the Effective Date, each Defendant must: a.

Designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with each Defendant; b.

Identify all businesses for which each Defendant is the majority owner, or that each Defendant directly or indirectly controls, by all of their names, telephone numbers, and physical, postal, email, and Internet addresses;

Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales;

Identify Krause’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and e.

Describe in detail Krause’s involvement in any business for which he performs services in any capacity or which he wholly or partially owns, including Krause’s title, role, responsibilities, participation, authority, control, and ownership. 55.

Each Defendant must report any change in the information required to be submitted under this Section at least 30 calendar days before the change or as soon as practicable after the learning about the change, whichever is sooner. G. ORDER DISTRIBUTION AND ACKNOWLEDGEMENT IT IS FURTHER ORDERED that:

56.

Within 10 days of the Effective Date, Student Loan Processing.US and Krause, for any business for which either/both is the majority owner or which either/both directly or indirectly controls, must deliver a copy of this Final Order to Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 14 of 21 Page ID #:2312

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each of its executive officers, as well as to any managers, employees, service providers, or other agents and representatives who have responsibilities related to the subject matter of this Final Order. 57.

Defendants must secure a signed and dated statement acknowledging receipt of a copy of this Final Order, ensuring that any electronic signatures comply with the requirements of the E-Sign Act, 15 U.S.C. § 7001 et seq., within 30 days of delivery, from all persons receiving a copy of this Final Order under this Section.

H. RECORDKEEPING IT IS FURTHER ORDERED that:

58.

Defendants must retain, for at least 5 years from the Effective Date, the following business records:

All documents and records necessary to demonstrate full compliance with each provision of this Final Order, including all submissions to the Bureau;

Copies of all sale scripts, training materials, advertisements; websites, and other marketing materials related to Defendants’ Student Loan Services;

Records showing, for each individual Affected Consumer who enrolled in Defendants’ Student Loan Services: the consumer’s name, address, phone number, email address, amount paid, quantity of Student Loan Services purchased, description of the Student Loan Services purchased, the date on which the Student Loan Services were purchased, and if applicable, the date and reason consumer left the program;

For Defendants’ Student Loan Services, accounting records showing the gross and net revenues generated by the Student Loan Services;

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All consumer complaints and refund requests related to Defendants’ Student Loan Services and any responses to those complaints or requests; and f.

Records showing, for each employee who provided services related to Defendants’ Student Loan Services: the employee’s name; telephone number; email, physical, and postal address; job title or position; dates of service; and, if applicable, the reason for termination.

59.

Defendant must make the documents identified in this Section available to the Bureau upon the Bureau’s request. Retention of the documents may be in an electronic form.

60.

Defendants must not sell or transfer the documents identified in this Section to any other person or entity, except that nothing in this Paragraph shall prohibit or limit Defendants from supplying this information in response to a court order or request from a local, state, or federal government entity. Defendants must also not use the documents identified in this Section for any purpose other than for compliance with this Final Order.

I. COOPERATION WITH THE BUREAU 61.

Defendants must cooperate fully to help the Bureau determine the identity and location of, and the amount of injury sustained by, each Affected Consumer. Defendants must provide such information in its or its agents’ possession or control within 14 days of receiving a written request from the Bureau.

62.

Defendants must cooperate fully with the Bureau in this matter and in any investigation related to or associated with the conduct described in the Complaint. Defendants must provide truthful and complete information, evidence, and testimony. Defendants must appear for interviews, discovery, hearings, trials, and any other proceedings that the Bureau may reasonably request upon 10 days Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 16 of 21 Page ID #:2314

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written notice, or other reasonable notice, at such places and times as the Bureau may designate, without the service of compulsory process. J. COMPLIANCE MONITORING IT IS FURTHER ORDERED that, to monitor Defendants’ compliance with this Final Order:

63.

Within 14 days of receipt of a written request from the Bureau, unless the Bureau grants a further extension of time, each Defendant must submit additional compliance reports or other requested information, which must be made under penalty of perjury; provide sworn testimony; and produce documents. 64.

For matters concerning this Final Order, the Bureau is authorized by this Final Order to communicate directly with each Defendant, including Krause, unless Defendant has retained counsel related to these communications. 65.

Nothing in this Final Order limits the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process. K. NOTICES

IT IS FURTHER ORDERED:

66.

Unless otherwise directed in writing by the Bureau, Defendants must provide all submissions, requests, communications, or other documents relating to this Final Order in writing, with the subject line, CFPB v. IrvineWebWorks, Inc. d/b/a Student Loan Processing.US, Case No. 8:14-cv-1967 (C.D. Cal.), and send them either:

a. By overnight courier (not the U.S. Postal Service), as follows: Assistant Deputy Enforcement Director Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1625 Eye Street, N.W.

Washington D.C. 20006; or Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 17 of 21 Page ID #:2315

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b. By first-class mail to the below address and contemporaneously by email to [email protected]: Assistant Deputy Enforcement Director Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1700 G Street, N.W.

Washington D.C. 20552 L. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that: 67.

This Court retains jurisdiction of this matter for purposes of construction, modification, and enforcement of this Final Order.

IT IS SO ORDERED.

Dated this 15th day of March, 2016.

____________________________ United States District Judge Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 18 of 21 Page ID #:2316

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Exhibit A Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 19 of 21 Page ID #:2317

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March [date], 2016

IMPORTANT NOTICE TO STUDENT LOAN PROCESSING.US CUSTOMERS

On December 11, 2014, the Consumer Financial Protection Bureau (Bureau) – a federal government agency headquartered in Washington, D.C. – filed a lawsuit against IrvineWebWorks, Inc. d/b/a Student Loan Processing.US (SLP) and SLP’s president and owner, James Krause. In that lawsuit, the Bureau alleged that SLP and Krause charged consumers illegal upfront fees, deceived consumers about the costs of their services, and falsely represented an affiliation with the U.S. Department of Education, in violation of federal consumer financial laws. On [Insert Date], 2016, SLP and the Bureau reached a settlement and jointly asked the Court to enter a Final Order by which SLP is to permanently shut down, provide the Bureau with funds for partial refunds to consumers, and pay a fine. The Court entered that Final Order on [Insert Date].

RELIEF FOR CUSTOMERS OF STUDENT LOAN PROCESSING.US:

You will likely receive a refund of at least some of the fees you paid to SLP, unless you have already received a full refund. The Bureau will contact you when there is further information to share regarding the availability, status, and amount of refunds. In addition, any contract you entered with SLP is now cancelled, and SLP will no longer be charging you a monthly fee.

Since SLP is shutting down all of its operation by [Insert Date], SLP will no longer provide any services related to your federal student loan after that date. Therefore, after [Insert Date] SLP will no longer assist you with the annual recertification requirements to maintain your enrollment in U.S. Department of Education repayment programs. If you are (or may be) enrolled in an incomedriven repayment plan for your federal student loans, this settlement will not cause your monthly payment to increase, as long as you comply with the terms of enrollment. Income-driven repayment plans are available for free to student loan borrowers under federal law.

We urge you to read this letter carefully, and to immediately follow the steps outlined below.

WHAT YOU NEED TO DO IN RESPONSE TO THIS NOTICE:

 First, contact your federal student loan servicer – SLP is not your servicer – to ensure that the address, email, and phone number on file with your servicer is correct. This will ensure communications regarding your federal student loans come directly to you, rather than to SLP, and will ensure that you do not miss important information about your loans. If you do not know your federal student loan servicer, please contact the U.S. Department of Education at 800.4.FEDAID (800.433.3243) to get that information.

 Second, if you are (or may be) enrolled in an income-driven repayment plan for your federal student loans, you need to recertify your income and family size annually to remain enrolled in the plan. Please call your federal student loan servicer and confirm (a) whether you are enrolled in an income-driven repayment program, and (b) if so, the date by which you must recertify your income and family size to remain enrolled. Your servicer can tell you how to recertify on www.studentloans.gov.

If you have any questions about this letter, the lawsuit, or the Final Order, please contact the Bureau at [email protected].

Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 20 of 21 Page ID #:2318

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FREQUENTLY ASKED QUESTIONS

1. Wasn’t SLP my servicer? Who is my federal student loan servicer?

SLP is not a loan servicer and has no affiliation with the U.S. Department of Education. Any payments you made to SLP were not payments towards your federal student loan, but were fees kept by SLP. If you have questions about your payment history, you should contact your servicer directly.

Your student loan servicer is a company that contracts with the U.S. Department of Education and handles the billing and other services on your federal student loan, including loans for the William D. Ford Federal Direct Loan Program and for some older loans made by private lenders and guaranteed by the Department of Education (known as Federal Family Education Loans or FFEL). U.S. Department of Education loan servicers include companies such as Navient, Nelnet, MOHELA, Great Lakes Educational Loan Services, Inc., and FedLoan Servicing (PHEAA).

If you do not know your federal student loan servicer, please contact the U.S. Department of Education at 800.4.FEDAID (800.433.3243) to get that information.

2. What happens to the Service Agreement I executed with SLP?

Your Service Agreement and any other contracts that you signed with SLP (including the Limited Power of Attorney and Permission Letter) are now cancelled. You will no longer be charged any fee by SLP, including the monthly fee of at least $39 per month. SLP will continue to prepare, process, and mail to the U.S. Department of Education any paperwork necessary to maintain enrollment in repayment programs only until [Insert Date], and otherwise will no longer be providing any services.

3. Will I receive a refund of any of the fees that I paid to SLP?

Unless you have already received a full refund, you will likely receive a refund of at least some of the fees you paid to SLP. At this time we cannot determine the exact amount of the refund, nor can we provide the precise date when you will receive that refund. The Bureau will contact you when there is further information to share regarding the availability, status, and amount of refunds.

4. Do I need to do anything in response to this notice?

You should contact your federal student loan servicer to update the contact information you have on file with your servicer. You may also need to recertify your income and family size to remain enrolled in certain federal student loan repayment plans, including income-driven repayment plans. We encourage you to contact your servicer as soon as possible for more information and to ensure that you are enrolled in the repayment plan that’s best for your individual circumstances.

If you have any questions about your federal student loan and the repayment options that may be available to you, ask your federal student loan servicer or consult StudentAid.gov/repay, a U.S. Department of Education website. Please be aware that there are numerous free services to help you understand the terms, conditions, and options regarding your federal student loans. Case 8:14-cv-01967-JVS-DFM Document 75 Filed 03/15/16 Page 21 of 21 Page ID #:2319

Complaint (Dec. 2014)

PDF of this document (17 pages)

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ANTHONY ALEXIS, DC Bar # 384545 Email: [email protected] Phone: 202-435-7999 ORI LEV, DC Bar # 452565 Email: [email protected] Phone: 202-435-7164 FRANK KULBASKI, DC Bar # 438917 Email: [email protected] Phone: 202-435-7260 RINA TUCKER HARRIS, DC Bar #444550 Email: [email protected] Phone: 202-435-9196 BRANDIS C. ANDERSON, CA Bar # 261325 Email: [email protected] Phone: 202-435-7548 Consumer Financial Protection Bureau 1700 G Street NW Washington, DC 20552 Fax: (202) 435-7722 Attorneys for Plaintiff Consumer Financial Protection Bureau UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION Consumer Financial Protection Bureau, Plaintiff, v.

IrvineWebWorks, Inc. d/b/a Student Loan Processing.US, a California corporation; and James Krause, an individual;

Defendants.

Case No. 8:14-cv-1967 COMPLAINT FOR PERMANENT INJUNCTION AND OTHER RELIEF Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 1 of 17 Page ID #:1

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The Consumer Financial Protection Bureau (“Bureau”) alleges the following against IrvineWebWorks, Inc. d/b/a Student Loan Processing.US and James Krause (collectively, “Defendants”):

JURISDICTION AND VENUE 1.

This Court has subject-matter jurisdiction over this action because it is “brought under Federal consumer financial law,” 12 U.S.C. § 5565(a)(1), presents a federal question, 28 U.S.C. § 1331, and is brought by an agency of the United States, 28 U.S.C. § 1345.

Venue is proper in this district because Defendants are located, reside, and do business in this district, and because a substantial part of the events or omissions giving rise to the claims occurred in this district. 28 U.S.C. § 1391(b); 12 U.S.C. § 5564(f).

INTRODUCTION 3.

The Bureau brings this action under the Consumer Financial Protection Act of 2010 (“CFPA”), 12 U.S.C. §§ 5531, 5536(a), 5564, 5565, and the Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §§ 6102(c)(2) , 6105(d), and its implementing regulation, the Telemarketing Sales Rule (“TSR”), 16 C.F.R. part 310, based on misrepresentations connected to the Defendants’ marketing and sale of student loan debt relief services and the charging of advance fees. The Bureau seeks to obtain permanent injunctive relief, civil money penalties, and other relief as set forth below. PLAINTIFF 4.

The Bureau is an independent agency of the United States charged with regulating the offering and provision of consumer financial products and services under Federal consumer financial laws, including the CFPA and the TSR. 12 U.S.C. §§ 5481(14), 5491(a), 5531(a); 15 U.S.C. § 6105(d). The Bureau has Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 2 of 17 Page ID #:2

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independent litigating authority to enforce Federal consumer financial laws. 12 U.S.C. §§ 5564(a), (b); 15 U.S.C. § 6105(d).

DEFENDANTS 5.

Defendant IrvineWebWorks, Inc. d/b/a Student Loan Processing.US (“Student Loan Processing.US”) is a California corporation headquartered at 42 South Peak Drive in Laguna Nigel, California. Student Loan Processing.US maintains an office in Lake Forest, California and Dallas, Texas. Founded in May 2011, Student Loan Processing.US provides, or purports to provide, advice and assistance to student loan borrowers applying for U.S. Department of Education federal student loan repayment programs, including Direct Consolidation Loans and the Income-Based Repayment Plan. These services are “financial advisory services” to assist borrowers with student loan debt management, which are consumer financial services under the CFPA. 12 U.S.C. § 5481(15)(A)(viii); 5481(5). Student Loan Processing.US is therefore a “covered person” under the CFPA. 12 U.S.C. § 5481(6).

Defendant James Krause is the founder, president, and sole owner of Student Loan Processing.US. Krause has substantial managerial responsibility for and daily control over the operations of Student Loan Processing.US, including sales, onboarding, training, communications, compliance, as well as Student Loan Processing.US’s policies and procedures. Krause is therefore a “related person” under the CFPA, and is a “covered person” under the CFPA. 12 U.S.C. § 5481(25)(C)(i).

FACTS U.S. Department of Education Repayment Programs 7.

The U.S. Department of Education offers numerous repayment plans to eligible borrowers with federal student loans, which are designed to help borrowers manage their student loan debt and make repayment of student loans Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 3 of 17 Page ID #:3

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more affordable. These plans include its Graduated Repayment Plan, Income- Based Repayment Plan, and Pay As You Earn Repayment Plan. The amount the borrower will pay and the repayment term can vary depending on the repayment plan in which the borrower enrolls.

To access certain repayment plans, some borrowers will first combine their multiple eligible federal student loans into a single Direct Consolidation Loan. Eligible borrowers can apply electronically for a Direct Consolidation Loan through the U.S. Department of Education’s website at www.StudentLoans.gov or by mailing a completed paper application to the U.S. Department of Education. 9.

The U.S. Department of Education does not charge borrowers any fee to apply for a Direct Consolidation Loan or any U.S. Department of Education repayment plan or program.

Defendants’ Student Loan Debt Relief Services 10.

Since at least July 2011 through the present (the “relevant time period”), Defendants have marketed and advertised for-cost services to advise and assist student loan borrowers applying for U.S. Department of Education federal student loan repayment programs, including the Income-Based Repayment Program, and Direct Consolidation Loans.

11.

Claiming to be a “consultation service” that works with the U.S. Department of Education, Defendants claimed to offer borrowers an “affordable way to make [their] Federal Student Loan debt more flexible and easy to manage.” Defendants also claimed to “work directly with your lenders, consolidate your Federal Student Loan with the Department of Education, and help you obtain one LOW monthly payment to save you thousands of dollars.” 12.

In exchange for an upfront enrollment fee and recurring monthly fee, Student Loan Processing.US, under the direction and control of Krause, purported to perform a variety of student loan debt relief services for its customers. Those Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 4 of 17 Page ID #:4

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services included helping borrowers identify the various U.S. Department of Education repayment plans for which the borrowers qualify, helping borrowers prepare and complete their application for a Direct Consolidation Loan, assisting borrowers to “correct” any errors made by the U.S. Department of Education in processing the borrower’s enrollment in a repayment plan, and complying with annual recertification programs and/or helping borrowers identify more favorable repayment programs in the event that the borrower’s circumstances have changed, thereby making the borrower eligible for other repayment programs. 13.

The enrollment fee charged by Defendants for their services amounted to the greater of 1% of the borrower’s federal student loan balance or $250. 14.

Defendants also charged consumers a recurring monthly fee. The “Monthly Maintenance Fee” was generally $39 per month and was charged for the entire repayment term of the borrower’s federal student loan. The $39 fee, however, was predicated on the borrower paying said fee via automatic debit. If the consumer refused to provide their financial institution account information for automatic debits, Defendants charged the customer an additional $15 per month, making the recurring monthly fee $54 per month.

The Marketing and Advertising of Defendants’ Debt Relief Services 15.

Defendants operated at least three active URLs to advertise their student loan debt relief services, all of which contain either an “.us” or “.org” suffix: www.studentloanprocessing.us, www.slpus.org, and www.studentloanprocessing.org. Defendants also operated several social media websites including pages and accounts on Facebook, LinkedIn, Tumblr, and Twitter.

16.

Throughout the relevant time period, Defendants primarily relied on a direct mailer and outbound telemarketing to attract consumers. Some consumers learned about Student Loan Processing.US through website submissions or Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 5 of 17 Page ID #:5

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customer referrals, although it is estimated that less than 10% of customers learned about Defendants through those two channels.

17.

Aside from a few non-material changes, the outside of the bi-fold direct mailer used by the Defendants during the relevant period generally appeared as displayed below, and included the words “Official Business” in bold font, a citation to 18 U.S.C. §§ 1702 et seq., a bald-eagle stamp, and the logo of Student Loan Processing.US (which changed during the relevant time period, as discussed infra).

18.

Inside the Defendants’ mailer, displayed in Paragraph 17 above, language stated that Student Loan Processing.US “work[s] with the Department of Education to consolidate all your existing Federally Insured Student Loans.” The mailer also purported to highlight “new” federal student loan benefits, which include lower monthly payments, lower interest rates, forgiveness programs, and increased monthly cash flow. Touting the “easy qualification process,” the direct mailer used by Defendants during the relevant time period directed the borrower to Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 6 of 17 Page ID #:6

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call Defendants’ toll-free number before their next payment due date to “receive [their] federal benefits.”

Defendants’ Enrollment Process and Advance Fee Collection 19.

Consumers who contacted Defendants in response to an outbound call, the Defendants’ mailer, or any other recruitment channel spoke with a selfproclaimed “Student Loan Specialist” for enrollment with Student Loan Processing.US.

20.

The enrollment calls typically began with staff at Student Loan Processing.US telling the consumer that they were “prequalified” for certain federal student loan repayment and forgiveness programs. During the call, the “specialists” directed the consumer to divulge their confidential 4-digit PIN information for the U.S. Department of Education’s National Student Loan Data System, collected information about the borrower’s federal student loan balances and annual income, and then quoted the new expected federal student loan monthly payment amount for borrowers who enroll.

21.

Defendants then gathered banking information from the borrower for payment of the enrollment fee, which was generally collected from the consumer’s debit/credit card or bank account during the initial enrollment call. If a consumer needed to schedule payment of the enrollment fee or to break the enrollment fee into more than one payment, Defendants’ employees were directed to ask the consumer about the frequency with which they were paid, as well as their next expected payday, in order to schedule the enrollment fee payment around that date. 22.

During the relevant time period, Defendants requested and received millions of dollars in enrollment fees from consumers seeking student loan debt relief services.

23.

Full payment of the enrollment fee was required before Defendants mailed the application for the Direct Consolidation Loan to the consumer, and as a Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 7 of 17 Page ID #:7

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result, well before the U.S. Department of Education modified or altered any of the repayment terms of the consumer’s federal student loans. 24.

All the terms of the contractual relationship between Defendants and the consumers, including payment terms, were set forth in a written agreement between the two parties, which was generally transmitted to the consumer via email towards the end of the enrollment call. Consumers were required to execute the agreement with the Defendants to complete enrollment with Student Loan Processing.US. The agreement remains in effect until the consumer’s federal student loans are “paid in full” or “discharged due to [the consumer] qualifying for a federal discharge.”

25.

Enrollment for any and all of the services offered by Student Loan Processing.US was done over the phone, and there was no option for face-to-face enrollment.

Defendants’ Misrepresentations about an Affiliation with the U.S. Department of Education 26.

Throughout the relevant time period, Defendants misrepresented to consumers, directly or by implication, that they were agents of the U.S. Department of Education or were affiliated with that agency in some capacity. 27.

In truth and in fact, Defendants are not currently, nor have they ever been, affiliated with, endorsed by, or sponsored by the U.S. Department of Education.

28.

As described above in Paragraphs 17 and 18, throughout the relevant time period, Defendants used a bi-fold direct mailer to solicit customers, which included the words “Official Business” in bold font, a citation to 18 U.S.C. §§ 1702 et seq., a bald-eagle stamp, and the logo of Student Loan Processing.US on the mailer’s exterior. Inside the mailer, language stated that Student Loan Processing.US “work[s] with the Department of Education to consolidate all your Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 8 of 17 Page ID #:8

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existing Federally Insured Student Loans” without any disclaimer that Defendants had no affiliation with the U.S. Department of Education. 29.

Until at least late August 2012, Defendants’ website, accessible at www.studentloanprocessing.us, stated that Student Loan Processing.US “work[ed] together with the Department of Education!” with no disclaimer that Defendants were not, nor ever were, affiliated with the U.S. Department of Education. 30.

On August 27, 2012, the U.S. Department of Education sent Defendants a letter concerning Defendants’ use of a misleading seal and certain misrepresentations on Defendants’ website. In that letter, the U.S. Department of Education requested that Defendants make changes to their website and insisted that a disclaimer be placed on the homepage.

31.

From approximately September 2012 until sometime in 2014, Defendants included disclaimer language in small font at the bottom of their website homepage stating that Student Loan Processing.US was not affiliated with the U.S. Department of Education. The language, however, was not conspicuous. In 2014, the disclaimer language was moved to the “Frequently Asked Questions” section of the website.

32.

Until approximately September 2012, the logo for Student Loan Processing.US (image on the left below) shared several similarities with the U.S. Department of Education seal (image on the right below), including the outer spherical gold border, inner spherical gold border, tree “growing” from a base, and medium blue shading between the borders with white text. Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 9 of 17 Page ID #:9

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33.

The logo for Student Loan Processing.US was used on all printed materials distributed to consumers by the Defendants, including the direct mailer described in Paragraph 17 above, as well as on the website and all social media sites for Student Loan Procesing.US.

34.

In or around September 2012, Defendants modified the logo to appear as displayed below. While the tree has been removed and replaced by a gold shield and two American flags, the new seal still shares similarities with the U.S. Department of Education seal, including the medium blue shading between the borders with the white text, as well as the inner and outer spherical gold border, and continues to resemble a government seal.

35.

As noted above in Paragraph 20, during the enrollment call, Defendants required consumers to provide their confidential 4-digit PIN for the U.S. Department of Education’s National Student Loan Data System (“NSLDS”). In requesting this information, employees stated that they “already [had] access to the DOE’s National Student Loan Database” but noted that they needed to “verify [the consumer’s] information and answer to the challenge question.” Employees then used the borrower’s 4-digit PIN to log into NSLDS as if they were the borrower. If consumers could not recall their 4-digit PIN, the employees requested a duplicate PIN on the borrower’s behalf.

36.

In truth and in fact, the NSLDS “access” that Defendants represented to “already have” was no more than public access to the NSLDS Student Access Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 10 of 17 Page ID #:10

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website, which anyone, including the borrower, could have accessed at www.nslds.ed.gov.

Defendants’ Misrepresentations Related to the Cost of Their Student Debt Relief Services 37.

Throughout the relevant time period, Defendants also misled consumers about the price of their services, including the fact that the quoted price included a recurring monthly maintenance fee charged by Defendants. 38.

During the enrollment call, Defendants directed their student loan “specialists” to include the recurring monthly fee in the new monthly payment amount that the consumer would be expected to pay if she enrolled with Student Loan Processing.US and were put in a U.S. Department of Education repayment program. In discussing the consumer’s eligibility for a U.S. Department of Education repayment program, Defendants would advise borrowers that the repayment program that could save them the most money over the life of a loan was a program where “the monthly payment” was only “$___ per month for ___ months.” The quoted figure included the $39 monthly payment amount. 39.

Later in the enrollment call, Defendants separately disclosed the enrollment fee and the recurring monthly fee, but downplayed those fees by stating that “all of the saving and the payments we discussed already have all of the fees for our services included and there are no additional costs whatsoever.” Defendants also explained that the recurring monthly fee was required because Defendants have to “re-certify [the consumer’s] eligibility for the [repayment] program every twelve months,” even though such recertification is not required for every repayment program.

40.

Defendants failed, during the enrollment call, to clearly and expressly explain that the recurring monthly maintenance fee would be charged for the Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 11 of 17 Page ID #:11

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repayment term of the borrower’s federal student loans, and made no statements about the duration of the recurring fee.

41.

For at least some consumers whose financial circumstances could potentially qualify them for a $0 monthly payment, Defendants regularly advised those consumers that Student Loan Processing.US could get that consumer’s monthly payment amount “down to $39,” without separately explaining that the entire $39 payment would be paid to Defendants as a monthly fee, rather than payment toward the consumer’s federal student loans. These types of statements, as well as those described in the preceding paragraphs, were made before a consumer consented to payment, as well as during the actual enrollment (when payment was made).

COUNT I (Abusive Telemarketing Act or Practice Related to Advance Fees) 42.

The allegations in Paragraphs 1 to 41 are incorporated here by reference.

43.

It is an abusive telemarketing act or practice and a violation of the TSR for any seller or telemarketer to request or receive payment of any fee or consideration for any debt relief service until and unless: a. The seller or telemarketer has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or other such valid contractual agreement executed by the customer; b. The customer has made at least one payment pursuant to that settlement agreement, debt management plan, or other valid contractual agreement between the customer and the creditor or debt collector; and Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 12 of 17 Page ID #:12

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c. To the extent that debts enrolled in a service are renegotiated, settled, reduced, or otherwise altered individually, the fee or consideration either (1) bears the same proportional relationship to the total fee for renegotiating, settling, reducing, or altering the terms of the entire debt balance as the individual debt amount bears to the entire debt amount; or (2) is a percentage of the amount saved as a result of the renegotiation, settlement, reduction, or alteration. 16 C.F.R. § 310.4(a)(5)(i).

44.

Defendants are a “sellers” or “telemarketers” engaged in the “telemarketing” of “debt relief services” as defined by the TSR. 16 C.F.R. §§ 310.2(m), (aa), (cc), and (dd).

45.

In numerous instances during the relevant time period, in connection with telemarketing student loan debt relief services, Defendants have requested and received payment of a fee or consideration for a debt relief service before (1) it has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement agreement, debt management plan, or otherwise such valid contractual agreement executed by the customer; and (2) the customer made at least one payment pursuant to that agreement. 46.

Therefore, Defendants have engaged in abusive telemarketing acts or practices in violation of the TSR. 16 C.F.R. § 310.4(a)(5)(i). COUNT II (Deceptive Telemarketing Act or Practice Related to Government Affiliation) 47.

The allegations in Paragraphs 1 to 41 are incorporated here by reference.

48.

It is a deceptive telemarketing act or practice and a violation of the TSR for any seller or telemarketer to misrepresent, directly or by implication, in the sale of good or services, a seller’s or telemarketer’s affiliation with, or Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 13 of 17 Page ID #:13

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endorsement or sponsorship by, any person or government entity. 16 C.F.R. § 310.3(a)(2)(vii).

49.

As described above, in numerous instances during the relevant time period, in the course of telemarketing student loan debt relief services, Defendants made misrepresentations, directly or by implication, that created the net impression that Defendants were affiliated with, endorsed by, or sponsored by the U.S. Department of Education, a federal government entity. 50.

Therefore, Defendants have engaged in deceptive telemarketing acts or practices in violation of the TSR. 16 C.F.R. § 310.3(a)(2)(vii). COUNT III (Deceptive Telemarketing Act or Practice Related to Cost) 51.

The allegations in Paragraphs 1 to 41 are incorporated here by reference.

52.

It is a deceptive telemarketing act or practice and a violation of the TSR for any seller or telemarketer, before a customer consents to pay for goods or services offered, to fail to disclose truthfully, in a clear and conspicuous manner, the total costs to purchase, receive, or use, and the quantity of, any good or services that are the subject of the sales offer. 16 C.F.R. § 310.3(a)(1)(i). 53.

It is a deceptive telemarketing act or practice and a violation of the TSR for any seller or telemarketer, to misrepresent, directly or by implication, in the sale of good or services the total costs to purchase, receive, or use, and the quantity of, any goods or services that are the subject of a sales offer. 16 C.F.R. §§ 310.3(a)(2)(i).

54.

As described above, in numerous instances during the relevant time period, in the course of telemarketing student loan debt relief services and before the consumer consented to pay, Defendants failed to disclose truthfully, in a clear Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 14 of 17 Page ID #:14

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and conspicuous manner, the total costs to purchase, receive, or use the Defendants’ goods or services.

55.

As described above, in numerous instances during the relevant time period, in the course of telemarketing student loan debt relief services, Defendants misrepresented, directly or by implication, the total costs to purchase, receive, or use Defendants’ good or services.

56.

Therefore, Defendants have engaged in deceptive telemarketing acts or practices in violation of the TSR. 16 C.F.R. §§ 310.3(a)(1)(i) and 310.3(a)(2)(i). COUNT IV (Deceptive Acts or Practices Related to Government Affiliation) 57.

The allegations in Paragraphs 1 to 41 are incorporated here by reference.

58.

The CFPA prohibits any covered person from engaging in deceptive acts or practices. 12 U.S.C. § 5536(a)(1)(B). 59.

As described above, in numerous instances during the relevant time period, in connection with the offering or provision of student loan debt relief services, Defendants made representations, expressly or by implication, that created the net impression that Defendants were affiliated with the U.S. Department of Education.

60.

In truth and in fact, Defendants are not, and never have been, affiliated with U.S. Department of Education or any other state or federal government agency. This misrepresentation of government affiliation is material and likely to mislead a reasonable consumer. 61.

Therefore, Defendants’ misrepresentations as set forth herein constitute deceptive acts and practices in violation of sections 1031 and 1036(a)(1) of the CFPA, 12 U.S.C. §§ 5531, 5536(a)(1). Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 15 of 17 Page ID #:15

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COUNT V (Deceptive Acts or Practices Related to Cost) 62.

The allegations in Paragraphs 1 to 41 are incorporated here by reference.

63.

The CFPA prohibits any covered person from engaging in deceptive acts or practices. 12 U.S.C. § 5536(a)(1)(B). 64.

As described above, in numerous instances during the relevant time period, in connection with the offering or provision of student loan debt relief services, Defendants failed to clearly disclose and misrepresented the total cost of Defendants’ student loan debt relief services. This misrepresentation related to the cost of Defendants’ services is material and likely to mislead a reasonable consumer.

65.

The CFPA empowers this Court to grant any appropriate legal or equitable relief with respect to violations of Federal consumer financial law, including, without limitation, permanent or temporary injunction, rescission or reformation of contracts, the refund of moneys paid, restitution, disgorgement or compensation for unjust enrichment, and civil money penalties. 12 U.S.C. §§ 5565.

PRAYER FOR RELIEF WHEREFORE, the Bureau requests that the Court: a.

Permanently enjoin Defendants from committing future violations of the TSR and the CFPA;

Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 16 of 17 Page ID #:16

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Order Defendants to pay restitution to consumers harmed by their unlawful conduct;

Order disgorgement of ill-gotten revenues against Defendants; d.

Impose civil money penalties against Defendants; e.

Order the rescission or reformation of contracts where necessary to redress injury to consumers; f.

Order Defendants to pay the Bureau’s costs incurred in connection with proceeding with this action; and g.

Award additional relief as the Court may determine to be just and proper.

Dated: December 11, 2014 Respectfully submitted, Anthony Alexis Acting Enforcement Director Ori Lev Deputy Enforcement Director Frank Kulbaski Assistant Deputy Enforcement Director Rina Tucker Harris Enforcement Attorney /s/ Brandis Anderson Brandis C. Anderson, CA Bar # 261325 (Email: [email protected]) Enforcement Attorney 1700 G Street NW Washington, DC 20552 Phone: (202) 435-7548 Fax: (202) 435-7722

Attorneys for Plaintiff Consumer Financial Protection Bureau

Case 8:14-cv-01967 Document 1 Filed 12/11/14 Page 17 of 17 Page ID #:17

Stipulation (Mar. 2016)

PDF of this document (21 pages)

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Attorneys for Plaintiff Consumer Financial Protection Bureau

JEFFREY C. BRIGGS, CA Bar #100369 (Email: [email protected]; Phone: 323-461-5400) Briggs Law Office 6464 Sunset Blvd., Ste. 715 Hollywood, CA 90028 Fax: 323-908-7275

Attorney for Defendants IrvineWebWorks, Inc., dba Student Loan Processing.US, and James Krause

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SOUTHERN DIVISION

Consumer Financial Protection Bureau,

Plaintiff,

IrvineWebWorks, Inc. d/b/a Student Loan Processing.US, et al.,

Defendants.

Case No. SACV14-1967-JVS (DFMx)

[PROPOSED] STIPULATED FINAL JUDGMENT AND ORDER

Case 8:14-cv-01967-JVS-DFM Document 74-1 Filed 03/15/16 Page 1 of 21 Page ID #:2278

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FINDINGS 1.

The Court has jurisdiction over the Parties and the subject matter of this action.

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Defendants admit that defendant James Krause is a “related person” as defined by the CFPA.

Entry of this Final Order is in the public interest. II.

DEFINITIONS The following definitions shall apply to this Final Order: 10.

“Advance Fee” means any fee or consideration requested or received from a consumer, in connection with telemarketing, by an entity, whether directly or indirectly, that occurs before:

a. That entity has renegotiated, settled, reduced, or otherwise altered the terms of at least one debt pursuant to a settlement Case 8:14-cv-01967-JVS-DFM Document 74-1 Filed 03/15/16 Page 3 of 21 Page ID #:2280

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“Affected Consumer” means any consumer who paid any money to Student Loan Processing.US for Student Loan Services pursuant to any agreement entered into on or before the Effective Date. 12.

13.

“Defendants” shall mean Student Loan Processing.US and Krause, individually, collectively, or in any combination. 14.

“Effective Date” means the date on which the Final Order is entered by the Court.

Case 8:14-cv-01967-JVS-DFM Document 74-1 Filed 03/15/16 Page 4 of 21 Page ID #:2281

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15.

“Enforcement Director” means the Assistant Director of the Office of Enforcement for the Consumer Financial Protection Bureau, or his or her delegate. 16.

“Krause” means James Krause, as well as his successors and assigns. 17.

“Monthly Maintenance Fee” means any recurring monthly fee charged by Student Loan Processing.US for its Student Loan Services. 18.

19.

“Student Loan Processing.US” means IrvineWebWorks, Inc. d/b/a Student Loan Processing.US, as well as its successors and assigns. 20.

“Student Loan Service” means any program, product, or service marketed, offered, provided, administered, or sold related to student loans. III.

ORDER A. CONDUCT PROHIBITIONS AND INJUNCTIVE RELIEF IT IS HEREBY ORDERED as follows:

21.

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25.

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27.

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28.

IT IS FURTHER ORDERED that:

30.

31.

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32.

33.

34.

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IT IS FURTHER ORDERED that:

36.

38.

D. CIVIL MONEY PENALTY IT IS FURTHER ORDERED that:

39.

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40.

43.

The civil money penalty paid under this Order will be deposited in the Civil Penalty Fund of the Bureau as required by Section 1017(d) of the CFPA, 12 U.S.C. § 5497(d).

44.

Defendants must treat the civil money penalty paid under this Order as a penalty paid to the government for all purposes. Regardless of how the Bureau ultimately uses those funds, Defendants may not:

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a. Claim, assert, or apply for a tax deduction, tax credit, or any other tax benefit for any civil money penalty paid under this Order.

45.

46.

E. OTHER MONETARY PROVISIONS IT IS FURTHER ORDERED that:

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48.

Defendants must relinquish all dominion, control, and title to the funds paid under this Final Order to the fullest extent permitted by law, and no part of the funds may be returned to Defendants.

50.

51.

F. REPORTING REQUIREMENTS

IT IS FURTHER ORDERED that:

53.

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Within 10 days of the Effective Date, each Defendant must: a.

Designate at least one telephone number and email, physical, and postal address as points of contact, which the Bureau may use to communicate with each Defendant; b.

Describe the activities of each such business, including the products and services offered, and the means of advertising, marketing, and sales;

Identify Krause’s telephone numbers and all email, Internet, physical, and postal addresses, including all residences; and e.

56.

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H. RECORDKEEPING IT IS FURTHER ORDERED that:

58.

Defendants must retain, for at least 5 years from the Effective Date, the following business records:

All documents and records necessary to demonstrate full compliance with each provision of this Final Order, including all submissions to the Bureau;

Copies of all sale scripts, training materials, advertisements; websites, and other marketing materials related to Defendants’ Student Loan Services;

For Defendants’ Student Loan Services, accounting records showing the gross and net revenues generated by the Student Loan Services;

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All consumer complaints and refund requests related to Defendants’ Student Loan Services and any responses to those complaints or requests; and f.

59.

Defendant must make the documents identified in this Section available to the Bureau upon the Bureau’s request. Retention of the documents may be in an electronic form.

60.

I. COOPERATION WITH THE BUREAU 61.

62.

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63.

Nothing in this Final Order limits the Bureau’s lawful use of civil investigative demands under 12 C.F.R. § 1080.6 or other compulsory process. K. NOTICES

IT IS FURTHER ORDERED:

66.

a. By overnight courier (not the U.S. Postal Service), as follows: Assistant Deputy Enforcement Director Consumer Financial Protection Bureau ATTENTION: Office of Enforcement 1625 Eye Street, N.W.

Washington D.C. 20006; or Case 8:14-cv-01967-JVS-DFM Document 74-1 Filed 03/15/16 Page 17 of 21 Page ID #:2294

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Washington D.C. 20552 L. RETENTION OF JURISDICTION IT IS FURTHER ORDERED that: 67.

This Court retains jurisdiction of this matter for purposes of construction, modification, and enforcement of this Final Order.

IT IS SO ORDERED.

Dated this ____ day of ________, 2016.

____________________________ United States District Judge Case 8:14-cv-01967-JVS-DFM Document 74-1 Filed 03/15/16 Page 18 of 21 Page ID #:2295

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Exhibit A Case 8:14-cv-01967-JVS-DFM Document 74-1 Filed 03/15/16 Page 19 of 21 Page ID #:2296

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March [date], 2016

IMPORTANT NOTICE TO STUDENT LOAN PROCESSING.US CUSTOMERS

RELIEF FOR CUSTOMERS OF STUDENT LOAN PROCESSING.US:

We urge you to read this letter carefully, and to immediately follow the steps outlined below.

WHAT YOU NEED TO DO IN RESPONSE TO THIS NOTICE:

• First, contact your federal student loan servicer – SLP is not your servicer – to ensure that the address, email, and phone number on file with your servicer is correct. This will ensure communications regarding your federal student loans come directly to you, rather than to SLP, and will ensure that you do not miss important information about your loans. If you do not know your federal student loan servicer, please contact the U.S. Department of Education at 800.4.FEDAID (800.433.3243) to get that information.

• Second, if you are (or may be) enrolled in an income-driven repayment plan for your federal student loans, you need to recertify your income and family size annually to remain enrolled in the plan. Please call your federal student loan servicer and confirm (a) whether you are enrolled in an income-driven repayment program, and (b) if so, the date by which you must recertify your income and family size to remain enrolled. Your servicer can tell you how to recertify on www.studentloans.gov.

If you have any questions about this letter, the lawsuit, or the Final Order, please contact the Bureau at [email protected].

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FREQUENTLY ASKED QUESTIONS

1. Wasn’t SLP my servicer? Who is my federal student loan servicer?

If you do not know your federal student loan servicer, please contact the U.S. Department of Education at 800.4.FEDAID (800.433.3243) to get that information.

2. What happens to the Service Agreement I executed with SLP?

3. Will I receive a refund of any of the fees that I paid to SLP?

4. Do I need to do anything in response to this notice?