On September 12, 2024, the CFPB announced that it entered into a stipulated proposed order with a large student loan servicer resolving allegations that the servicer forced borrowers into costly repayment options. Under the proposed order, the servicer would cease its servicing federal direct loans.
In a January 2017 complaint, the CFPB accused the servicer of steering borrowers into forbearance instead of income-driven repayment plans, which allegedly led to increased interest charges. Additionally, the CFPB accused the servicer of violating Consumer Financial Protection Act (CFPA), the Fair Credit Reporting Act (FCRA), and the Fair Debt Collection Practices Act (FDCPA) by: (1) allegedly failing to tell borrowers in income-driven repayment plans about annual recertification of enrollment in those plans; (2) allegedly misallocating payments made by borrowers with multiple loans; (3) allegedly harming the credit of disabled borrowers; (4) allegedly failing to honor agreements that consigners of private loans could be released; and (5) allegedly failing to honor agreements to provide credit reporting relief if borrowers with defaulted loans completed a rehabilitation program.
Under the proposed order, in addition to ceasing its servicing of federal direct loans, the servicer also agreed to pay $100 million in redress to consumers and a $20 million civil penalty.
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