“Multi-year servicing failures” are claimed against two organizations engaged in student lending under action taken Monday by the federal consumer financial protection agency seeking more than $5 million in penalties and redress, the agency said.
The National Collegiate Student Loan Trusts and Pennsylvania Higher Education Assistance Agency (PHEAA) were charged for the servicing failures by the Consumer Financial Protection Bureau (CFPB).
The bureau alleges that the organizations ignored student loan borrowers seeking relief from student loan payments, including during the COVID-19 national emergency.
The final judgments proposed by the agency against the firms would require National Collegiate and PHEAA to pay $400,000 and $1.75 million in penalties, respectively, to the CFPB’s victims relief fund. The firms would also pay nearly $3 million in redress to harmed borrowers, CFPB said.
According to CFPB, National Collegiate — a group of 15 securitization trusts organized under Delaware law — acquired, pooled, and securitized student loans, which the firms then serviced. As of February 2024, CFPB said, National Collegiate collectively held approximately 163,000 private student loans with approximately $907 million in outstanding balances.
PHEAA, CFPB said (commonly known as American Education Services or AES), is a student loan servicer with its principal office in Harrisburg, Pa., incorporated under Pennsylvania law. As of December 2023, PHEAA serviced a portfolio of student loans worth roughly $17.8 billion, CFPB said, and has been the primary servicer for active loans held by the National Collegiate Student Loan Trusts since at least 2006.
“In today’s case, the CFPB alleges that the defendants violated the Consumer Financial Protection Act,” the agency said in a release. “The CFPB’s complaint alleges that from 2015 until 2021, thousands of borrower requests—often seeking forms of payment relief—went unanswered. These included requests for co-signer release, extension of forbearance or deferment, loan settlement or forgiveness, Servicemember Civil Relief Act benefits, or other forms of payment or interest rate reduction.”
The bureau said thousands of borrowers sent requests to the firms during the pandemic seeking forbearance on loans held by the National Collegiate Student Loan Trusts. However, the agency said, many of those requests were mishandled. The borrowers either received no response, were not provided accurate information or were incorrectly denied forbearance.