CFPB Settles With Student Loan Servicer for $3.9 Million

​On May 1, the Consumer Financial Protection Bureau (CFPB) announced a $3.9 million settlement with a student loan servicer, resolving allegations that the servicer engaged in unfair acts or practices in violation of the Consumer Financial Protection Act (CFPA).

The parties’ consent order resolves allegations that the servicer failed to timely process loan adjustments, resulting in errors in borrowers’ principal balance amounts. The CFPB asserted that, when the servicer processed approved requests for deferment, forbearance, or income-based repayment, it adjusted the borrowers’ monthly billed amounts but did not always make other adjustments to the borrowers’ accounts that were necessary, beyond the monthly billed amounts.  Between 2005 and 2014, at least, certain adjustments to the principal balance had to be made manually by a trained loan processor.  During that time period, the servicer did not always timely process adjustments to the principal balance.  Instead, the company placed loans in electronic queues for later processing.  While loans were in these queues, they remained unadjusted with potentially incorrect principal balances.  As a result, the balances paid off by borrowers may also have been incorrect in certain instances.  Borrowers were not informed that their principal balances remained unadjusted while the loans were in the queue.

Pursuant to the consent order, the servicer will review potentially affected loans to determine whether adjustments are required and, if so, will compensate affected borrowers.  The servicer will also pay the CFPB a $3.9 million civil money penalty.

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