The Consumer Financial Protection Bureau on Thursday announced an enforcement action against a student loan servicing company, fining it $1 million for allegedly making deceptive statements to borrowers and misrepresenting the forgiveness and repayment options related to the Public Service Loan Forgiveness program.
The action, taken against Edfinancial, comes a month after the CFPB had issued a warning to student loan servicers to make sure they were not mispresenting or making deceptive statements with respect to the PSLF program. Estimates have pegged the number of individuals eligible for loan forgiveness under the PSLF program at 1.3 million, but more than 98% of applicants have been rejected, largely because the individuals had student loans that were not eligible to be forgiven.
Edfinancial was accused of telling individuals that they were not eligible for the PSLF program, that their loans could not be consolidated, that past payments made by borrowers did not qualify when in fact they did, and that individuals had jobs that did not qualify when in fact they did. Edfinancial was also found to have not mentioned the PSLF as an option when borrowers made inquiries about the forgiveness options that may have been available to them.
The company has been ordered to contact borrowers who are eligible for a waiver under the Federal Family Education Loan Program (FFELP) before the PSLF waiver expires in October, and pay a fine of $1 million.
“Edfinancial’s failure to tell the full truth to borrowers, so it could pad its bottom line highlights a systemic problem with loan servicing,” said CFPB Director Rohit Chopra, in a statement. “When student loan companies lie about cancellation and repayment programs for borrowers, they are breaking the law.”
