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Financial Services Law Insights and Observations

New Jersey charges student loan servicer with deceptive collection practices

State Issues State Attorney General Student Lending

State Issues

On October 20, the New Jersey Attorney General and the Acting Director of the New Jersey Division of Consumer Affairs filed a complaint alleging a student loan servicer engaged in unlawful practices when collecting on loans owned by borrowers residing in the state. Among other things, the complaint alleges that the servicer (i) steered borrowers into forbearance programs instead of income-driven repayment (IDR) plans; (ii) failed to inform borrowers about IDR recertification deadlines and the effects of not timely submitting a recertification application; (iii) encouraged borrowers to obtain a cosigner for their student loans and then misrepresented the requirements for obtaining a cosigner release; and (iv) misled delinquent borrowers about the amount of their delinquency, by including the next month’s payment in the “present amount due.” The complaint alleges two violations of the New Jersey Consumer Fraud Act and seeks equitable injunctive relief, borrower restitution, disgorgement, statutory penalties, and costs and fees.

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