Edfinancial Fined for Misleading Student Borrowers
The latest development in the scandal-ridden student loan program involves a small Tennessee company, Edfinancial Services, ordered to pay a $1 million civil penalty for misleading student borrowers.
“Edfinancial’s failure to tell the full truth to borrowers, so it could pad its bottom line highlights a systemic problem with loan servicing,” said Rohit Chopra, director of the Consumer Financial Protection Bureau. “When student loan companies lie about cancellation and repayment programs for borrowers, they are breaking the law.”
Edfinancial allegedly made deceptive statements to student loan borrowers and misrepresented the forgiveness and repayment options open to them. Edfinancial deceived borrowers, with Federal Family Education Loan Program (FFELP), loans about their eligibility for Public Service Loan Forgiveness (PSLF), CFPB said. The Bureau is ordering the company to contact all affected borrowers, provide them with accurate information, and pay a $1 million civil money penalty.
Edfinancial is a small, rapidly growing student-loan servicer headquartered in Knoxville, Tennessee. Edfinancial markets itself to borrowers and the public as providing expert help in navigating complex student-loan repayment options, and Edfinancial’s customer representatives regularly field questions about PSLF and other types of loan cancellation programs.
In 2008, President George W. Bush signed legislation that established the PSLF program. Student-loan borrowers who work in public-service jobs such as the armed forces or with a local, state, tribal, or federal government, as well as certain nonprofit organizations, may be eligible for PSLF.
Last month, following findings that servicers have misled borrowers about their loans’ PSLF eligibility, the Bureau warned servicers not to misrepresent borrower eligibility or make deceptive statements about the PSLF program and the waiver. And today, the Department of Education released a letter to FFELP servicers raising concerns that deceptive practices regarding FFELP borrowers’ eligibility for PSLF might be widespread.
The letter warns FFELP servicers of additional oversight on these issues and reminds them to ensure that they are actively informing borrowers of the availability of federal debt relief programs and any changes to those programs and responding to borrower inquiries with complete information.
“Public employees provide important services in communities across America,” said Federal Student Aid Chief Richard Cordray. “We are making it clear to all companies that service federal student loans that they are expected to provide these borrowers with accurate information about how to get the loan forgiveness they deserve.”
The Bureau found that Edfinancial violated the Consumer Financial Protection Act by engaging in deceptive acts and practices. Edfinancial encouraged borrowers to reach out to it for help managing their student loans, and it indicated that it was an expert and could assist borrowers navigating complex student-loan repayment options.