CFPB Fines Student Loan Servicer $1 Million to Settle Alleged UDAAP Violations
On March 30, the CFPB settled with a student loan servicer to resolve allegations that the servicer made deceptive statements to student loan borrowers and misrepresented their forgiveness and repayment options, including deceiving borrowers with Federal Family Education Loan Program (FFELP) loans about their eligibility for Public Service Loan Forgiveness (PSLF). The consent order requires the servicer to pay a $1 million civil money penalty.
The Bureau found that the servicer violated the Consumer Financial Protection Act by engaging in deceptive acts and practices and harmed student loan borrowers by:
Misrepresenting that FFELP borrowers could not receive PSLF
Misrepresenting that FFELP borrowers were making payments towards PSLF before loan consolidation
Misrepresenting to borrowers that certain jobs were not eligible for PSLF
Describing forgiveness programs to FFELP borrowers without mentioning PSLF
In addition to the $1 million fine, the CFPB’s order requires the company to take various actions including: notifying them about the opportunity to participate in the PSLF Limited Waiver; developing and implementing a call script for its customer service representatives to use when speaking with FFELP borrowers; and reviewing and enhancing policies, procedures, and training materials to accurately detail the eligibility requirements for PSLF.
CFPB Director Rohit Chopra issued a statement regarding the latest order. “Millions of borrowers are paying excess fees and interest charges, or extra payments on amounts that should have been canceled through existing cancellation programs, because of misaligned incentives by student loan servicers and bureaucratic red tape.” “For too long, we have asked millions of student loan borrowers to bear the brunt of this broken system. That must end,” he said.
Putting it Into Practice: Participants in the student lending space, and servicers in particular, should be reviewing the CFPB’s latest order with a focus on reducing potentially unfair, deceptive, or abusive acts or practices (UDAAPs) with respect to interactions with student loan borrowers. This latest action is in line with a number of enforcement actions pursued by the Bureau against post-secondary schools. The CFPB’s examination procedures manual is intended for use by Bureau examiners, and is available as a resource to those subject to its exams. These procedures should be reviewed and incorporated into all student loan servicer policies and procedures.