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Financial Services Law Insights and Observations

CFPB scrutinizes student loan servicers’ PSLF compliance

Federal Issues CFPB Student Lending Student Loan Servicer PSLF Compliance Dodd-Frank UDAAP Department of Education Consumer Finance

Federal Issues

On February 18, the CFPB released a compliance bulletin warning student loan servicers to make sure they provide complete and accurate information to eligible borrowers about Public Service Loan Forgiveness (PSLF) benefits. The Bureau indicated that it will be paying close attention to servicers’ compliance with Dodd-Frank’s prohibition on unfair, deceptive, or abusive acts or practices. Last October, the Department of Education changed its PSLF program to now provide qualifying borrowers with a time-limited PSLF waiver that allows all payments to count towards PSLF regardless of loan program or payment plan. The waiver covers payments made on loans under the Federal Family Education Loan Program or Perkins Loan Program. (Covered by InfoBytes here.) However, Bureau supervisory findings revealed unfair or deceptive practices taken by servicers that have prevented many borrowers from making progress towards forgiveness. The Bureau emphasized that it expects servicers to comply with federal consumer financial protection laws when administering the new PSLF waiver and providing assistance to borrowers. The Bureau “will pay particular attention” to whether (i) servicers of any federal loan type provide complete and accurate information about the PSLF waiver in communications related to PSLF or loan consolidation; (ii) servicers have adequate policies and procedures to recognize when borrowers express interest in PSLF or the PSLF waiver (or where borrowers’ files otherwise demonstrate their eligibility), in order to direct borrowers to appropriate resources; and (iii) servicers take measures “to promote the benefits of the PSLF Waiver to borrowers who express interest or whose files otherwise demonstrate their eligibility.” The Bureau advised servicers to consider enhancing their compliance management systems to ensure borrowers receive accurate and complete information about the PSLF waiver and that their enrollment is facilitated.