CFPB Takes Action Against Student Loan Servicer for Alleged Deceptive Practices
By Owen Daugherty, NASFAA Staff Reporter
The Consumer Financial Protection Bureau (CFPB) on Wednesday took action against student loan servicer Edfinancial Services for alleged deceptive practices regarding borrowers’ eligibility for the Public Service Loan Forgiveness (PSLF) program.
CFPB in an announcement alleged Edfinancial “made a series of deceptive statements to borrowers about loan cancellation for public service,” including by incorrectly telling borrowers with Federal Family Education Loan Program (FFELP) loans that they could not qualify for the program.
The federal watchdog said its findings show Edfinancial’s alleged deceptive practices center around borrowers’ eligibility for loan forgiveness through the PSLF program, in some instances with regard to the expanded eligibility criteria put in place with a temporary waiver for the program that ends Oct. 31, 2022.
As part of the sanctions imposed on Edfinancial, the student loan servicer must reach out to each FFELP borrower in its portfolio to correct the statements and help borrowers consolidate their loans into Direct Loans if they so choose, according to the announcement from CFPB. Edfinancial will also be required to pay a $1 million civil penalty.
“Edfinancial’s failure to tell the full truth to borrowers, so it could pad its bottom line highlights a systemic problem with loan servicing,” CFPB Director Rohit Chopra said in a statement. “When student loan companies lie about cancellation and repayment programs for borrowers, they are breaking the law.”
Edfinancial in a statement said it rejects CFPB's allegations and opted to agree to the terms of the settlement instead of go through costly litigation.
Edfinancial is a loan servicer; we do not directly loan money to borrowers, nor do we retain any payments made by borrowers. Edfinancial’s mission has always been to do the right thing for our customers," the company said in a statement. "With this process now behind us, we can once again devote all our energy and resources toward our customers."
Federal Student Aid Chief Operating Officer Richard Cordray said the actions are the latest step by the federal government to protect public workers and ensure they receive the loan forgiveness they are entitled to.
“We are making it clear to all companies that service federal student loans that they are expected to provide these borrowers with accurate information about how to get the loan forgiveness they deserve,” Cordray said.
3/31 Editors Note: This article was updated to include a statement from Edfinancial.
Publication Date: 3/31/2022
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