Edfinancial Lied About Student Loans, CFPB Says
Student loan servicer Edfinancial Services lied to borrowers about their forgiveness and repayment options, the Consumer Financial Protection Bureau said Wednesday (March 30).
The CFPB is thus sanctioning the Tennessee company, ordering it to pay a $1 million penalty and contact all borrowers and give them accurate information.
“Edfinancial’s failure to tell the full truth to borrowers, so it could pad its bottom line highlights a systemic problem with loan servicing,” CFPB Director Rohit Chopra said in a news release. “When student loan companies lie about cancellation and repayment programs for borrowers, they are breaking the law.”
Representatives from Edfinancial were not immediately available for comment Wednesday.
Read more: CFPB Warns Student Loan Servicers About Public Service Forgiveness
The news comes weeks after the CFPB issued a bulletin warning student loan servicers that they could face sanctions if they mislead borrowers about loan forgiveness programs tied to public service.
Officials from the CFPB and the U.S. Department of Education have said recently that the practices Edfinancial are accused of are part of a broader pattern of student loan servicing companies misleading borrowers about their eligibility for forgiveness programs.
According to the CFPB, Edfiancial misled borrowers by telling them they were ineligible for student loan forgiveness through the Public Service Loan Forgiveness (PSLF) act.
That law, which dates back to 2008, says that borrowers who hold public-service jobs such as the military or with a local, state, tribal or federal government, as well as some nonprofits organizations, may be eligible for loan forgiveness.
As PYMNTS has previously reported, the federal government estimates 1.3 million borrowers are eligible to have their direct loans canceled because they work in these fields and have made monthly payments for 10 years.
The CFPB says Edfiancnial also failed to tell borrowers that they had loans that could be consolidated. The company is also accused of misrepresenting to borrowers that some jobs were not illegible for loan forgiveness and of mentioning the PSLF act when talking about loan forgiveness programs.