A range of alleged unlawful activities identified across student loan markets – including in refinancing, servicing and debt collection – and involving both federal and private loans is outlined in report issued Monday by the federal consumer financial protection agency.
According to the Consumer Financial Protection Bureau (CFPB), the alleged unlawful activities uncovered by agency examiners and detailed in the report include:
- Lenders misled borrowers and failed to carry out their instructions for refinancing;
- Private lenders deceived borrowers or denied benefits;
- Servicers failed to address claims related to school misconduct;
- Servicers distributed contracts allowing alleged illegal collection tactics;
- Federal loan servicers harmed borrowers during return to repayment.
On that final point, the agency said its examiners observed that “federal loan servicers failed to provide, for extended time periods, adequate ways for borrowers to manage key loan issues by phone. Servicers also issued deceptive billing statements with incorrect payment amounts and due dates, and debited unauthorized amounts. Significantly, examiners also uncovered numerous problems with how servicers processed borrowers’ applications for income-driven repayment plans.”
The CFPB said student loans represent the second-largest form of U.S. consumer debt at more than $1.7 trillion in total outstanding balances. “Within the past year, many student borrowers faced challenges, including as 28 million federal student loan borrowers returned to repayment following the end of the COVID-19 payment pause,” CFPB said.
CFPB Uncovers Illegal Practices Across Student Loan Refinancing, Servicing, and Debt Collection
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