Delaying borrowers’ loan rehabilitation processes, generating fees for itself and costing individual borrowers thousands of dollars has earned a Florida-based student loan debt collector an order to pay a $700,000 penalty and be banned from servicing or collecting any such debts, the federal consumer financial protection agency said issued Monday.
According to the Consumer Financial Protection Agency (CFPB), Performant Recovery, Inc. of Plantation, Fla., allegedly engaged in unlawful student loan debt collection practices. The bureau said among the firm’s collection targets were borrowers who defaulted on Federal Family Education Loan Program (FFELP) loans. CFPB noted that such borrowers have a one-time right to rehabilitate their loans and “bring them back into good standing by entering into an agreement and making a series of reasonable and affordable payments.”
Borrowers who enter into loan rehabilitation agreements within 65 days of default are not to be charged collection costs for the rehabilitations, the bureau indicated. Nor are the borrowers typically required to pay debt collection agencies any fees for these rehabilitations, the agency suggested.
However, CFPB charged, from 2015 to 2020, Performant used its control over the rehabilitation process to delay borrowers’ loan rehabilitations beyond the 65-day period so that borrowers would incur collection costs and Performant would generate fees for itself.
“When borrowers called Performant with 65 days of default, the company routed these borrowers to specialized agents, who were told by managers that ‘the objective is to delay as much as possible without getting Performant in trouble,’” the bureau said in a release. “Instead of filling out rehabilitation forms over the phone as they did with other borrowers, agents told these borrowers that they would need to receive blank forms by postal mail, and typically did not use email, fax, or other methods. Performant agents held up these borrowers’ rehabilitations at every stage. As a manager explained to agents, ‘[W]e want them to mail all documents. Remember the whole objective is to DELAY, DELAY, DELAY.’”
CFPB said its order issued Monday bans Performant from servicing or collecting on any student loan debt, and requires the payment of the $700,000 fine. The agency said the proceeds of the fine will potentially be used to fully redress borrowers harmed by Performant’s illegal conduct.
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