CFPB Fines Student Loan Servicer $1 Million to Settle Alleged UDAAP Violations

On March 30, the CFPB settled with a scholar mortgage servicer to resolve allegations that the servicer made misleading statements to scholar mortgage debtors and misrepresented their forgiveness and compensation choices, together with deceiving debtors with Federal Household Training 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 cash penalty.

The Bureau discovered that the servicer violated the Shopper Monetary Safety Act by partaking in misleading acts and practices and harmed scholar mortgage debtors by:

  • Misrepresenting that FFELP debtors couldn’t obtain PSLF

  • Misrepresenting that FFELP debtors have been making funds in the direction of PSLF earlier than mortgage consolidation

  • Misrepresenting to debtors that sure jobs weren’t eligible for PSLF

  • Describing forgiveness applications to FFELP debtors with out mentioning PSLF

As well as to the $1 million high quality, the CFPB’s order requires the corporate to take numerous actions together with:  notifying them concerning the alternative to take part within the PSLF Restricted Waiver; growing and implementing a name script for its customer support representatives to use when talking with FFELP debtors; and reviewing and enhancing insurance policies, procedures, and coaching supplies to precisely element the eligibility necessities for PSLF.

CFPB Director Rohit Chopra issued a statement concerning the newest 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 stated.

Placing it Into Follow:  Contributors within the scholar lending area, and servicers specifically, ought to be reviewing the CFPB’s newest order with a deal with decreasing doubtlessly unfair, misleading, or abusive acts or practices (UDAAPs) with respect to interactions with scholar mortgage debtors.  This newest motion is according to various enforcement actions pursued by the Bureau towards post-secondary faculties.  The CFPB’s examination procedures manual is meant to be used by Bureau examiners, and is accessible as a useful resource to these topic to its exams. These procedures ought to be reviewed and included into all scholar mortgage servicer insurance policies and procedures.

Source link