The CFPB fined student loan company Edfinancial over findings that the company had lied to borrowers.
The agency said borrowers with FFEL loans were particularly misled about public service loan forgiveness.
The CFPB is demanding that Edfinancial pay a $1 million fine and inform borrowers about forgiveness.
A small student loan company has just been fined for allegations of lying to borrowers about forgiving loans and repayment programs.
On Wednesday, the Consumer Financial Protection Bureau (CFPB) sanctioned Edfinancial Services for “making deceptive statements to student loan borrowers and misrepresenting their forgiveness and repayment options,” the press release said.
Specifically, the agency said Edfinancial has failed to provide accurate information to borrowers of the private Federal Family Education Loan (FFEL) program about their eligibility for the Public Service Loan Forgiveness (PSLF) program — a program that reduces student debt for government officials after ten years, and recently expanded its eligibility to FFEL borrowers through a temporary waiver.
“Edfinancial’s failure to tell the full truth to borrowers so it can pad its bottom line points to a systemic problem with lending,” Rohit Chopra, director of the CFPB, said in a statement. “When student loan companies lie about borrower cancellation and refund programs, they are breaking the law.”
Edfinancial did not immediately respond to Insider’s request for comment.
In October, the Ministry of Education announced reforms to PSLF, including a waiver until October 2022 that would allow past payments, including those that may have been ineligible for the program, to count towards the progress of the PSLF. That included borrowers in the FFEL program, which previously did not count, but as the CFPB reported Wednesday, Edfinancial misrepresented the eligibility of those borrowers.
The agency found Edfinancial “damaged” borrowers by:
Claiming that FFEL borrowers do not have PSLF . could receive
Misrepresentation of the fact that FFEL borrowers made payments to PSLF before consolidating their loans into direct loans – a requirement for eligibility for the forgiveness program
Misrepresentation of which jobs qualify for PSLF
And not mentioning PSLF to FFELb borrowers when describing loan forgiveness programs.
The CFPB is requiring Edfinancial to contact all FFEL borrowers to give them the opportunity to take advantage of the PSLF waiver before it expires, along with paying a $1 million fine to the agency’s Civil Penalty Fund .
Although the FFEL program was discontinued in 2010, millions of borrowers have continued to pay off these privately owned loans. Chopra wrote in his statement that “Edfinancial is not a huge service provider, but its deceptive practices can have a huge impact on an individual borrower’s financial future,” which is why Richard Cordray, head of Federal Student Aid, wrote a letter to borrowers after the CFPB’s actions to bring the issues to “immediate attention” from any company handling FFEL borrowers.
“We have no reason to believe that these issues — dating from at least January 2017 to at least February 2021 — were unique to EdFinancial. Rather, they may well reflect the long-standing approach to how others dealt with the same issues. at the same time and maybe even now,” Cordray wrote. “FSA and CFPB can be expected to continue monitoring these issues, and every company should do everything in their power to address them right away, in order to avoid fines or other consequences,” he added.
Mike Pierce, executive director of the Student Borrower Protection Center, told Insider that the CFPB’s actions were “a long time coming,” and the words of both Chopra and Cordray could suggest that all student loan companies — not just Edfinancial — will face increasing enforcement measures.
“There is language that feels much broader than just the mere enforcement action or two that suggests that the CFPB is watching the entire student loan industry and looking at its behavior well beyond just forgiving public loans, but basically any place where companies for student loans are cheating borrowers,” Pierce said.
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