Student Loan Servicer Agrees to Ban on Servicing Direct Loans

A student loan servicer settled CFPB charges for misleading borrowers about repayment options and for engaging in unfair debt collection practices.

In a case brought before the US District Court for the Middle District of Pennsylvania, the CFPB alleged that the servicer misled borrowers who were struggling to repay their student loans by steering them into forbearance plans rather than advising them of alternative repayment plans that could have lowered their payments. The CFPB further alleged that the servicer was also providing incorrect information regarding eligibility for loan forgiveness and using deceptive practices in its debt collection operations.

The CFPB charged that the servicer violated Section 1031(a) ("Unfair, deceptive, or abusive acts or practices"), Section 1036(a)(1) ("Prohibited Acts") and Section 5531(a) ("Unfair, deceptive, or abusive acts or practices"), 5536(a)(1) ("Prohibited Acts") of the Consumer Financial Protection Act, 12 section 1022.42(a) ("Accuracy and Integrity of Furnished Information") of the Fair Credit Reporting Act, and 15 U.S.C. § 1692e ("False or misleading Representations") of the Fair Debt Collection Practices Act, in connection with the servicer's student loan and debt collection practices. 

In a the District Court's Proposed Stipulated Final Judgment and Order, the servicer neither admitted nor denied the allegations in the Complaint, agreed to (i) pay $100 million in redress to affected borrowers, (ii) pay a civil money penalty of $20 million and (iii) cease servicing federal student loans and Federal Family Education Loan Program loans.