WASHINGTON DC – The Consumer Financial Protection Bureau (CFPB) today sanctioned Edfinancial Services, a student loan servicer, for making misleading representations to student borrowers and misrepresenting their forgiveness and repayment options. Edfinancial misled borrowers, with Federal Family Education Loans Program (FFELP), loans about their eligibility for Public Service Loan Forgiveness (PSLF). The Bureau orders the company to contact all affected borrowers, provide them with accurate information and pay a civil penalty of $1 million.
“Edfinancial’s failure to tell borrowers the full truth, so it can inflate its results, highlights a systemic problem with loan servicing,” CFPB Director Rohit Chopra said. “When student loan companies lie about forgiveness and repayment programs for borrowers, they are breaking the law.”
Read the statement from CFPB Director Chopra on the cancellation of Edfinancial and student loans for public service forgiveness.
Edfinancial is a small, rapidly growing student loan servicer headquartered in Knoxville, Tennessee. Edfinancial markets itself to borrowers and the public as providing expert assistance in navigating complex student loan repayment options, and Edfinancial customer representatives regularly answer questions about the PSLF and other types of forgiveness programs. loan.
In 2008, President George W. Bush signed legislation establishing the PSLF program. Student borrowers who hold public service jobs such as the armed forces or with local, state, tribal or federal government, as well as certain non-profit organizations, may be eligible for the PSLF . Borrowers with FFELP loans, usually older federal student loans that borrowers took out with banks, must consolidate them into direct loans to be eligible for the PSLF. Prior to the Ministry of Education’s PSLF limited waiver, any payments made before an FFELP loan was consolidated into a direct loan were not considered for PSLF.
the Ministry of Education Limited PSLF Waiver , announced in October 2021, extended benefits to FFELP borrowers. Under the waiver, any previous payment on a federal student loan by a borrower working in the public service may be considered for PSLF, regardless of payment plan, loan type, or whether the payment was made. in full or on time. This includes payments on FFELP loans. To qualify for the waiver, many borrowers will need to take action by consolidating their loans, filing a PSLF, or both, before the waiver ends on October 31, 2022.
Last month, after monitoring findings that the Services misled borrowers about the eligibility of their PSLF loans, the Bureau cautioned the Services not to misrepresent borrowers’ eligibility or make misleading statements about the PSLF program and waiver. And today, the Ministry of Education issued a letter to FFELP service officers concerned that misleading practices regarding the eligibility of FFELP borrowers for the PSLF are becoming widespread. The letter alerts FFELP Services to further monitoring on these matters and reminds them to ensure that they actively notify borrowers of the availability of federal debt relief programs and any changes to these programs and to respond. to borrowers’ requests with complete information.
“Public employees provide important services in communities across America,” said federal student aid chief Richard Cordray. “We make it clear to all companies that service federal student loans that they are expected to provide these borrowers with accurate information on how to get the loan forgiveness they deserve.”
Read the letter from the Ministry of Education to FFELP services.
The Bureau found that Edfinancial violated consumer financial protection law by engaging in deceptive acts and practices. Edfinancial encouraged borrowers to contact him for help managing their student loans, and he said he was an expert and could help borrowers navigate complex options. repayment of student loans. FFELP borrowers reasonably relied on Edfinancial to act in their best interests in providing them with complete and accurate information on how to qualify for the PSLF and all available discount options. Specifically, the company harmed student borrowers by:
- Distort that FFELP borrowers could not receive the PSLF: When borrowers with FFELP loans asked about the PSLF, Edfinancial in many cases told them they were not eligible, and the company did not tell them they could become eligible by consolidating their loans into direct loans and meeting other eligibility requirements. Sometimes Edfinancial falsely told borrowers that their FFELP loans could not be consolidated. These statements, misrepresentations and omissions created the false impression for borrowers with FFELP loans that they could not get PSLF.
- Falsely stating that FFELP borrowers were making payments to the PSLF before loan consolidation: Edfinancial, in explicit and implicit statements, told borrowers that their payments on FFELP loans would count towards the 10 years of monthly payments required to obtain the PSLF. Many borrowers were probably led to believe that they were progressing to the PSLF when they were not because they had not consolidated their FFELP loans into direct loans.
- Declare to borrowers that certain jobs were not eligible for the PSLF: In many cases, Edfinancial has explicitly stated that certain jobs would not be eligible for the PSLF when they were. In other cases, Edfinancial has not included entire job categories, such as nonprofit work, when discussing PSLF-eligible jobs. Edfinancial’s statements likely caused many eligible borrowers not to consider the PSLF as a forgiveness option.
- Describe FFELP borrower rebate programs without mentioning PSLF: When FFELP borrowers asked about the forgiveness options available to them, Edfinancial representatives often described the forgiveness options available only for FFELP loans and failed to mention PSLF. The company’s statements and omissions left the impression that PSLF was not an option for many FFELP borrowers. FFELP borrowers may have chosen not to pursue PSLF because they were unaware of PSLF or did not believe the program applied to them.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the power to take action against institutions that violate consumer financial laws, including by engaging in acts or practices unfair, misleading or abusive. The CFPB order requires Edfinancial to:
- Notify all affected borrowers of the PSLF Limited Exemption: The Bureau is asking Edfinancial to contact all of its FFELP borrowers to give them the opportunity to take advantage of the Ministry of Education’s limited PSLF waiver before it ends on October 31, 2022.
- Pay a penalty of $1 million: Edfinancial will pay a penalty of $1 million to the Bureau, which will be paid into the CFPB’s Civil Penalty Fund.
Read today’s order .
Last month, the CFPB issued a bulletin to servicers regarding their legal obligations regarding student loan forgiveness programs, including the PSLF.
Learn more about student loans and the civil service loan waiver.
Students and their families can find help on how to tackle their student debt through CFPB’s Paying for College suite of tools.
Student borrowers with student loan issues can also file a complaint with the CFPB.