By: April Carson
A student-loan firm just got hit with a hefty penalty for claims that it had misled borrowers about forgiveness and repayment alternatives. The bureau said that borrowers who received federal student loans under the FFEL program were misled about Public Service Loan Forgiveness.
On Wednesday, the Consumer Financial Protection Bureau (CFPB) sanctioned Edfinancial Services for "making deceptive statements to student loan borrowers and misrepresenting their forgiveness and repayment alternatives to them," according on a press release.
According to the CFPB, PHEAA had claimed that certain borrowers were eligible for loan forgiveness under the Public Service Loan Forgiveness program when they weren't. PHEAA also misled borrowers about the availability of income-driven repayment plans and the potential consequences of enrolling in them.
"Edfinancial Services preyed on student loan borrowers who were trying to do the right thing by misleading them about their forgiveness and repayment alternatives," said CFPB Director Richard Cordray. "We will continue to take action against companies that mislead consumers and put them deeper in debt."
The Consumer Financial Protection Bureau (CFPB) claims Edfinancial misled borrowers of the privately held Federal Family Education Loan (FFEL) program about their PSLF eligibility, a government-funded forgiveness program for public servants that recently expanded to include FFEL borrowers through a temporary moratorium.
The CFPB's decision to fine Edfinancial for deceptive practices not only highlights a growing concern in the loan servicing industry, but it also demonstrates a larger problem. When student loan providers mislead borrowers about cancellation and repayment choices, they are violating the law.
Insider has reached out to Edfinancial, but we have not yet received a response.
In October, the Education Department unveiled changes to PSLF — one of which included a waiver through October 2022 that would allow past payments, including those that may not have qualified for the program, to be taken into account toward PSLF progress. That also included borrowers in the FFEL program who previously didn't count, but Edfinancial misled them about their qualification.
The CFPB found that Edfinancial "hurt" borrowers by:
Disclaiming that PSLF is not available to FFEL borrowers
Misrepresenting that FFEL borrowers were paying off their loans before consolidating them into Direct loans — a requirement for eligibility in the forgiveness program
Misrepresenting which employment qualifies for PSLF
Failing to alert FFRDCPL borrowers about PSLF when referring them to loan forgiveness initiatives.
The CFPB is ordering Edfinancial to contact all FFEL borrowers throughout the country and give them a chance to use the PSLF exemption before it runs out, as well as pay a $1 million fine to the Civil Penalty Fund.
The FFEL program was terminated in 2010, but millions of people have continued to make payments on those loans, which are privately held. Chopra said in his statement that "Edfinancial is not a huge servicer," though its deceptive practices may have a significant influence on an individual borrower's financial future, which is why Federal Student Aid head Richard Cordray wrote a letter to borrowers regarding CFPB's actions to bring the issues to "prompt attention" of every firm that handles FFEL borrowers.
We know for a fact that these problems, which date back at least January 2017 and continuing through February 2021, were not limited to EdFinancial. To the contrary, they may well reflect the long-standing way in which others had previously handled similar concerns during the same period, as well as now.
"The FSA and CFPB will undoubtedly seek additional investigation of these issues, and every business should take preventative action immediately so as to avoid fines or other consequences," Cordray said.
"The actions by the Consumer Financial Protection Bureau are a long time coming, and the comments made by Chopra and Cordray indicate that all student-loan providers — not just Edfinancial — will be subjected to increased enforcement measures," says Executive Director of the Student Borrower Protection Center Mike Pierce.
"There are some words that I believe could have a much broader meaning than simply a single enforcement action or two, implying that the CFPB is monitoring the student loan industry and its conduct far beyond just public service loan forgiveness," said Pierce.
As student loan debt continues to mount, it's more important than ever that borrowers are able to trust their loan servicer. Unfortunately, cases like this show that this is not always the case. Thankfully, the CFPB is working to hold companies accountable and protect borrowers from being misled.
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About the Blogger:
April Carson is the daughter of Billy Carson. She received her bachelor's degree in Social Sciences from Jacksonville University, where she was also on the Women's Basketball team. She now has a successful clothing company that specializes in organic baby clothes and other items. Take a look at their most popular fall fashions on bossbabymav.com
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