Action against a Harrisburg, Pa., student lender was taken Friday for a second time in a month by the federal consumer financial protection agency, this time for illegally collecting on student loans that have been discharged in bankruptcy and sending false information about consumers to credit reporting companies, the agency said.
The Consumer Financial Protection Bureau (CFPB) said it is asking the court to order the firm, Pennsylvania Higher Education Assistance Agency (PHEAA), which does business as American Education Services (AES), to order PHEAA to stop its illegal conduct, provide redress to borrowers it has harmed, and pay a civil penalty. The bureau did not specify dollar amounts for the redress or penalty.
On May 6, the agency took action against PHEAA for “multi-year servicing failures.” The bureau alleged that the firm, as well as another – National Collegiate Student Loan Trusts — ignored student loan borrowers seeking relief from student loan payments, including during the COVID-19 national emergency.
The bureau proposed final judgments against the firms requiring 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.
According to CFPB, AES serviced a range of private student loans, including those that have strict discharge requirements in bankruptcy and non-qualified loans that are routinely discharged. “Nevertheless, when a consumer with private student loans serviced by AES receives a bankruptcy discharge, the company’s practice is to treat all of that consumer’s education-related loans as not discharged, unless it receives an explicit court order or other express direction from the loan owner,” the bureau said in a release.
The bureau alleges that PHEAA’s practices violate the Consumer Financial Protection Act (CFPA) and the Fair Credit Reporting Act’s (FCRA) implementing regulation. “As a result of PHEAA’s practices, borrowers are forced to either pay debt they do not owe or risk being hit with negative information on their credit reports and default due to the purported non-payment,” the bureau said.
CFPB Sues Student Loan Servicer PHEAA for Pursuing Borrowers for Loans Discharged in Bankruptcy