The CFPB has entered into a consent order with Edfinancial Services, a student loan servicer, to settle the Bureau’s allegations that Edfinancial engaged in deceptive acts and practices in violation of the CFPA UDAAP prohibition. The consent order requires Edfinancial to pay a $1 million civil money penalty.
According to the Bureau’s findings set forth in the consent order (which Edfinancial neither admits nor denies), Edfinancial made various misrepresentations to borrowers with Federal Family Education Loan Program (FFELP) loans about their eligibility for Public Service Loan Forgiveness (PSLF). Under the PSLF program, established in 2007, student loan borrowers with qualifying loans who work in public service jobs or for certain nonprofits are eligible for loan forgiveness if they make 120 qualifying payments under a permissible repayment plan. Unless a FFELP borrower can take advantage of the PSLF limited waiver that was announced by the Department of Education in October 2021 and that expires on October 31, 2022, FFELP borrowers must consolidate their FFELP loans into Direct Loans to be eligible for PSLF and any payments made before consolidating a FFELP loan into a Direct Loan do not count toward PSLF.
The Bureau’s findings in the consent order identify various misrepresentations made by Edfinancial customer service representatives to FFELP borrowers. Such misrepresentations concerned FFELP borrowers’ eligibility for PSLF, the ability of FFELP borrowers to consolidate their loans, whether payments on FFELP loans would count towards PSLF, whether certain jobs were eligible for PSLF, and the availability of PSLF to FFELP borrowers.
In addition to payment of the $1 million civil monetary penalty, the consent order requires Edfinancial to take various actions including: contacting FFELP borrowers about the PSLF limited waiver; communicating certain information about the limited waiver in incoming calls from FFELP borrowers and through its interactive voice response system: developing and implementing a call script for its customer service representatives to use when speaking with FFELP borrowers, a training program for customer service representatives, and a call monitoring program; and updating its website to provide information about eligibility of FFELP borrowers for PSLF.
In response to the CFPB’s press release about the consent order, Edfinancial released a statement that included the following:
Edfinancial Services has been providing loan servicing to our clients, including the U.S. Department of Education, for more than 25 years. We were recently ranked the No. 1 federal student loan servicer by the Department of Education as a result of our commitment to quality. The Consumer Financial Protection Bureau reviewed loans in our Federal Family Education Loan Program (FFELP) and alleged that our company had deceived or misled some of our borrowers about eligibility in a public service loan forgiveness program, an allegation we strenuously reject. However, facing protracted and costly litigation that would have distracted us from our day-to-day responsibilities to our clients, borrowers and staff, we have settled the case with the CFPB with a payment of $1 million and agreed to update our training for staff servicing FFELP loans.
Concurrently with the CFPB’s announcement of the consent order, the Department of Education sent a letter to FFELP servicers in which it described the CFPB’s settlement with Edfinancial and expressed concern that the issues involved in the settlement are not unique to Edfinancial. The letter reminds servicers that their responsibilities include “actively informing borrowers about available programs for debt relief, any changes to these programs, and providing complete information in response to inquiries and complaints.” In the letter, ED warns that “[Federal Student Aid] and CFPB can be expected to pursue further oversight of these issues, and every company should take pains to address them at once, so as to avoid penalties or other consequences.”