CFPB Sues Nation’s Largest Student Loan Company for Deception
01/25/17 – The Consumer Financial Protection Bureau (CFPB) is suing the nation’s largest servicer of both federal and private student loans for “systematically” and “illegally failing” borrowers as they repay their loans.
The company is the largest student loan servicer in the United States. It services the loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. Altogether, it services account for more than $300 billion in federal and private student loans.
According to the CFPB, for years, the lender provide bad information to borrowers, processed payments incorrectly, and failed to act when borrowers complained. The CFPB alleged this occurred because the servicer took shortcuts and deceived borrowers. This led to borrowers being unable to exercise their rights to lower repayments and caused them to pay more for their loans.
Specifically, the Bureau charges that the servicer:
- Fails to correctly apply or allocate borrower payments to their accounts;
- Steers borrowers toward paying more than they have to on loans;
- Obscured information consumers needed to maintain their lower payments;
- Deceived private student loan borrowers about requirements to release their co-signer from the loan; and
- Harmed the credit of borrowers with disabilities, including severely injured veterans.
The lawsuit alleges that the defendant violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collections Practices Act. The Bureau seeks to recover significant relief for the borrowers harmed by these illegal servicing failures and to prevent new borrowers from being harmed.