On May 31, 2024, the CFPB announced that it had filed suit against a Pennsylvania-based student loan servicer for engaging in allegedly unfair, deceptive and abusive acts or practices in violation of the CFPA, 12 U.S.C. §§ 5531, 5536(a)(1)(B), and for failing to establish reasonable credit reporting procedures in violation of Regulation V, 12 C.F.R. §§ 1022.40-43, and the CFPA, 12 U.S.C. § 5536(a)(1)(A).
According to the CFPB’s complaint filed in the Middle District of Pennsylvania, the company allegedly improperly collected or attempted to collect on private student loans that had been discharged in a bankruptcy proceeding. The CFPB alleges that the company maintains a policy of resuming servicing and collection on all private student loans after the conclusion of a bankruptcy proceeding, unless explicitly directed otherwise by the consumer or it receives a court order. The CFPB asserts that the company does not track and lacks proper procedures to determine whether a loan that it services was discharged in bankruptcy.
The CFPB further alleges that the company has collected on nearly 8,000 student loans after a bankruptcy proceeding, of which at least 177 were eligible for discharge in bankruptcy. The CFPB also contends that the company misled consumers into believing that they were required to pay loans that had been discharged in bankruptcy, by sending consumers payment schedule letters and billing statements. The CFPB further asserts that the company routinely furnishes inaccurate student loan information to credit reporting agencies, and that it lacks proper procedures to assess the accuracy of the student loan information that it provides to credit reporting agencies.
The CFPB is seeking a permanent injunction to prevent future violations of the CFPA and Regulation V, redress for consumers including injunctive relief, disgorgement and restitution, an unspecified civil money penalty, and its costs in bringing the action.
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