The Consumer Financial Protection Bureau (CFPB) has released a document that is critical of student loan servicers. It must have been an easy document to write, because, for the most part, student loan servicers suck donkey balls, with all their bad information and horrible advice to consumers. But here are the big items where the CFPB says student loan servicers are really, really horrible.
Misleading consumers about bankruptcy protections: CFPB examiners found that some servicers told consumers that student loans are not dischargeable in bankruptcy. While student loans are more difficult to discharge in bankruptcy than most other types of loans are, it is possible to discharge a student loan if the borrower affirmatively asserts and proves "undue hardship" in court. Servicer communications with borrowers asserted or implied that student loans were never dischargeable. (To learn how student loans can be discharged in bankruptcy, click here.)
Misrepresenting minimum payments: CFPB examiners found that one or more servicers inflated the minimum payment that was due on periodic statements and online account statements. These inflated numbers included amounts that were in deferment and not actually due.
Charging improper late fees: CFPB examiners found that one or more servicers were unfairly charging late fees when payments were received during the grace period. Like many other types of loans, many student loan contracts have grace periods after the due date. The promissory note stated that if a payment was received after the due date but during the grace period, late fees would not be charged.
Failing to provide accurate tax information: CFPB examiners found cases where student loan servicers failed to provide consumers with information that was essential for deducting student loan interest payments on their tax filings. The servicers impeded borrowers from accessing this information and misrepresented information on the consumers' online account statements. This practice may have caused some consumers to lose up to $2,500 in tax deductions.
Making illegal debt collection calls to consumers at inconvenient times: Examiners found that one or more student loan servicers routinely made debt collection calls to delinquent borrowers early in the morning or late at night. For example, examiners identified more than 5,000 calls made at inconvenient times during a 45-day period, which included 48 calls made to one consumer.