The bureau alleges two student loan servicers violated the Consumer Financial Protection Act.
05/07/2024 10:20 A.M.
2 minute read
The Consumer Financial Protection Bureau filed two complaints and requests for relief against student loan servicers this week.
“The National Collegiate Student Loan Trusts purchase and securitize student loans, and PHEAA (Pennysylvania Higher Education Assistance Agency) services the loans,” according to a news release from the CFPB.
According to the CFPB, the companies “failed to respond to borrowers seeking relief from student loan payments, including during the COVID-19 national emergency.”
If approved by the U.S. District Court for the Middle District of Pennsylvania, the proposed judgments would require the National Collegiate Student Loan Trusts and PHEAA to pay $400,000 and $1.75 million in penalties, respectively, to the CFPB’s victims relief fund. The companies would also be responsible for nearly $3 million in redress to consumers.
The CFPB reports thousands of consumers’ requests, including for payment relief, did not receive a response from the companies from 2015 until 2021.
It also states there was a failure to provide accurate information to borrowers and forbearance requests were incorrectly denied.
In addition to the financial redress, the companies will be required to correct the requests for borrowers, fix credit reporting errors and stop debt collection for some borrowers.
Student Loan Debt Relief Status
Meanwhile, the Department of Education has issued its Notice of Proposed Rulemaking (NPRM) outlining revised plans from the Biden administration to cancel student loan debt for approximately 30 million Americans, ACA International previously reported.
The NPRM would forgive unpaid interest for 25 million borrowers whose loans have surpassed the amount they originally borrowed; assist more than 2 million borrowers with debt for at least 20 years; and help 2 million borrowers who would have been eligible for existing federal programs but did not enroll.
The proposed regulations would modify the Department of Education’s existing debt collection regulations to provide greater specificity on the Secretary of Education’s discretion to waive federal student loan debt, according to the NPRM.
Comments are due on May 17, 2024, and the department is working to finalize its rules by the fall.
A separate proposed rule related to relief for borrowers experiencing hardship is expected to be released in the coming months.
Comments may be filed on the Federal eRulemaking Portal at Regulations.gov using document number 2024-07726.
ACA is reviewing the NPRM to consider filing comments. If you have feedback to share with ACA on the proposal, contact our advocacy team at [email protected].
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