Student loan servicers are facing new allegations of illegal practices after the Consumer Financial Protection Bureau (CFPB) released a report Monday detailing a range of unlawful activities across student loan markets.
The report highlights violations in refinancing, private lending, debt collection and federal loan servicing.
CFPB Director Rohit Chopra said, “Companies break the law when they mislead student borrowers about their protections or deny borrowers their rightful benefits.”
The bureau said consolidating loans through a private lender can end federal protections, but many providers misled lenders into thinking they would still have access to those benefits, like federal loan cancellation programs.
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Lenders reportedly inaccurately claimed some borrowers were ineligible for autopay discounts or falsely advertised to borrowers that they could suspend their loan payments if they lost their jobs, then later took away those benefits, the CFPB stated.
CFPB said some federal loan servicers did not provide "adequate ways for borrowers to manage key loan issues by phone, issued deceptive billing statements with incorrect payment amounts and due dates and debited unauthorized amounts."
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The agency said it also found loan contracts that would allow schools to illegally withhold academic transcripts or access to classes if a loan was defaulted.
Student loans are the second largest type of U.S. consumer debt totaling more than $1.7 trillion.
The report has been shared with companies in hopes they remediate the violations.
In more serious cases or when companies fail to take action, the bureau will open an investigation that can lead to enforcement actions.
Borrowers can submit complaints on the CFPB website.
