Nine Things the CFPB Did for Students and Borrowers Under Richard Cordray
By: Blaine Smith
The Consumer Financial Protection Bureau is often the only government agency looking out for student loan borrowers and protecting their financial interests. They work to, “protect consumers from unfair, deceptive, or abusive practices and take action against companies that break the law.” They also provide resources and handle complaints when businesses in the student loan industry step out of line. This month the first director of the CFPB, Richard Cordray, announced he would be stepping down. Here are some of the things the CFPB did for student loan borrowers under his leadership.
- Just this week, the CFPB ordered Citibank to refund $3.75 million to borrowers who were charged fraudulent interest and late fees, misled about tax deduction eligibility, and more.
Citibank misleadingly informed many customers that they weren’t eligible for an up to $2,500 student loan interest deduction. In addition to cheating borrowers out of this valuable deduction, they routinely overstated minimum monthly payments and overcharged on interest and late fees for students that qualified for in-school deferment. The CFPB order calls for a $3.75 million refund to borrowers and calls for a halt to Citibank’s deceptive loan servicing practices.
- In September 2017, the CFPB ensured at least $3.5 million in relief for more than 2,000 National Collegiate Student Loan Trusts.
The trust owns more than 800,000 private student loans and must do an audit to see if more of these loans are eligible for relief. The National Collegiate Student Loan Trusts initiated more than 94,000 lawsuits and their debt collector, Transworld Systems, wrongly sued borrowers on student loans that were not owed or were too old to be legally sued over. In addition to securing relief for students, the settlement requires the trusts to stop falsifying legal documents, attempting to collect or sue on debt without proper documentation, and filing collection lawsuits on debts that have passed the statute of limitations.
- In April 2016, the CFPB released its Payback Playbook product, a personalized guide for borrowers to develop an affordable payback plan.
The Playbook provides borrowers with transparent repayment options and will be available to borrowers on their monthly bills and email correspondence with their student loan servicers. In 2015, the Government Accountability Office found that 70% of federal loan borrowers earned low enough incomes to qualify for reduced monthly payments, and the Playbook will make this and other repayment information more transparent. This is an essential resource, free of the misleading fine-print and confusing jargon that often force borrowers into unfeasible repayment plans.
- In September 2016, the CFPB ordered fraudulent for-profit college chain Bridgepoint Education to discharge all outstanding private loans and refund $23.5 million in loan payments already made.
Bridgepoint has enrolled hundreds of thousands of students in the past several years. To cover the cost of tuition, Bridgepoint offered many of these students deceptively-framed private loans, claiming monthly payments would be as unrealistically low as $25 per month. In addition to the $23.5 million in automatic relief, the settlement requires Bridgeport to stop making false statements about monthly payments, to disclose the cost of education and information about default rates and potential salaries, and to remove negative information from borrowers’ credit reports associated with private loan debt.
- In March 2016, the CFPB filed a lawsuit against Student Loan Processing.US for running an illegal student relief operation that charged borrowers millions in illegal fees for federal loan services.
Student Loan Processing.US violated the Dodd-Frank Act’s provision against deceptive practices by collecting payments from customers before disclosing the cost of services. The company didn’t disclose the fees associated with using the service to the borrowers, and they forced customers to pay a fee before they could even apply for services. In addition, the company lied about being an authorized consultant for the Department of Education. The CFPB judgement would force $8.2 million in repayment to borrowers, although some of this would be suspended due to inability to repay. The company would also be forced to shut down operations, cancel all contracts with borrowers, and would be barred from participating in student loan services in the future.
- In January 2017, the CFPB initiated an ongoing suit against Navient (formerly Sallie Mae) for deceiving borrows and concealing their repayment rights for profit.
Navient services more than 12 million borrowers including federal and private student loans. Since 2009, most borrowers gained eligibility for income-based repayment with smaller monthly payments but to reduce operations costs, Navient never notified borrowers of this option. Navient also notoriously “lost” borrowers payments and guided borrowers to pay more than they had to leading to large interests on forbearances than benefitted Navient. This lawsuit is ongoing as CFPB seeks justice for these borrowers and attorneys general in Pennsylvania, Washington, and Illinois have joined the fight.
- Speaking of Navient: in October 2012, the CFPB uncovered Sallie Mae was illegally charging excessive interest on thousands of veterans’ student loans.
Sallie Mae continued to collect on veteran borrowers’ defaulted loans despite this being prohibited by the Servicemembers Civil Relief Act. After discovering these violations, the CFPB shared this with the Department of Justice and thus secured refunds for 78,000 service members who experience fraudulent charges at the hand of Sallie Mae.
- In August 2017, the CFPB has forged a multi-year fight to secure debt relief for students who took out high-cost private loans to attend the defunct for-profit Corinthian Colleges.
Corinthian Colleges folded in April 2015 amid allegations that it falsified admissions materials to attract students and lure them into taking out egregiously high loans. When the Colleges folded, 16,000 currently enrolled students were left without degrees or a path forward, severely indebted to a school that no longer existed. The CFPB sought $500 million in relief on behalf of borrowers but because the bankrupt Corinthian Colleges had limited assets. Finally, in 2017 the CFPB aimed to settle with Aequitas – a private equity firm that helped Corinthian falsify information about loans and revenue – for $183 million in debt relief for 40,000 borrowers.
- In July 2015, the CFPB ordered Discover Bank to refund $16 million to borrowers who were lied to about income tax benefits, minimum payments, and more.
Discover Bank mistreated well over 100,000 of its student loan borrowers by deceptively concealing information about interest paid, requiring borrowers to pay more than the minimum monthly payment, and inhibited borrowers from obtaining necessary tax forms to file their federal tax returns. The consent order filed by the CFPB will force Discover to refund thousands of borrowers and begin accurately and easily providing documents regarding tax benefits, minimum payment, interest, and more that have been hidden from their borrowers.