On March 30, the CFPB reached an agreement with a student loan servicer to resolve allegations that the servicer made misleading statements to student borrowers and misrepresented their forgiveness and repayment options, including misleading borrowers with loans from the Federal Family Education Loan Program (FFELP) as to their eligibility for Public Service Loan Surrender (PSLF). The consent order requires the duty officer to pay a civil penalty of $1 million.
The Bureau found that the manager violated the Consumer Financial Protection Act by engaging in deceptive acts and practices and caused harm to student borrowers by:
- Distort that FFELP borrowers could not receive the PSLF
- Falsely stating that FFELP borrowers were making payments to PSLF before loan consolidation
- Declare to borrowers that certain jobs were not eligible for the PSLF
- Describe FFELP borrower rebate programs without mentioning PSLF
In addition to the $1 million fine, the CFPB order requires the company to take various actions, including: informing them of the possibility of participating in the PSLF Limited Waiver; develop and implement a call script for its customer service representatives to use when speaking with FFELP borrowers; and review and improve policies, procedures, and training materials to accurately detail PSLF eligibility requirements.
CFPB Director Rohit Chopra released a statement regarding the latest order. “Millions of borrowers are paying excessive fees and interest, or extra payments on amounts that should have been canceled through existing cancellation programs, due to misaligned incentives by student loan servicers and bureaucratic bureaucracy.” “For too long we have asked millions of student borrowers to bear the brunt of this broken system. This must stop,” he said.
Put into practice : Participants in the student loan space, and service agents in particular, should review the CFPB’s latest order with a focus on reducing potentially unfair, deceptive, or abusive (UDAAP) acts or practices with respect to interactions with student borrowers. This latest action is part of a number of enforcement actions taken by the Bureau against post-secondary schools. The CFPB Examination Procedures Manual is intended for use by Bureau examiners and is available as a resource for those subject to its examinations. These procedures should be reviewed and incorporated into all student loan servicer policies and procedures.