CFPB fines student loan servicer $3.9 million for unfair practices
On May 1, the CFPB announced a $3.9 million settlement with a student loan servicing company. The settlement resolves allegations that the company engaged in unfair practices by failing to make adjustments to loans made under the Federal Family Education Loan Program to account for circumstances such as deferment, forbearance, or entrance into the Income-Based Repayment (IBR) program. According to the consent order, between 2005 and 2015, certain accounts requiring manual adjustments to principal loan balances based on program participation were allegedly placed in “queues” to process the adjustments, which took, in some cases, years to process. The servicer allegedly did not inform affected borrowers that it did not complete the processing of their principal balances associated with the deferment, forbearance, or IBR participation. The queues allegedly resulted in some borrowers paying off incorrect loan amounts and other borrowers experiencing delays in loan consolidation while waiting for the servicer to adjust principal balances. In addition to the $3.9 million civil money penalty, the consent order requires the servicer to make the proper adjustments to the principal balances of the affected accounts or pay restitution to borrowers who paid off loans with inaccurate loan balances. The servicer is also required to comply with certain compliance monitoring, reporting, and recordkeeping requirements.