Home / Compliance / Student Loan Servicer to Pay $9 Million For Engaging in Illegal Practices

Student Loan Servicer to Pay $9 Million For Engaging in Illegal Practices

The New York Department of Financial Services and the Attorney General of New York announced on Friday that Conduent Education Services has agreed to pay $9 million in fines and penalties for “engaging in practices” that harmed student loan borrowers, including misinforming them that they had to pay the delinquent and present month payment at the same time and reporting incomplete and erroneous information to credit bureaus.

Those were just some of the allegations made against Conduent, which was formerly known as Xerox Education Services, LLC, and formerly known as and doing business as ACS Education Services, Inc. Conduent has agreed to pay $8 million in restitution to student loan borrowers and pay a $1 million civil fine.

“Students rely on college to be a ladder to success, but too often prohibitive costs and disingenuous loan servicers trap students in a quick sand of debt,” said Attorney General Letitia James, in a statement. “ACS has systematically failed borrowers by refusing to educate them on more effective federal repayment options, and instead, pushing them towards options that were cheap, easy, and padded their bottom line. At a time when the student debt crisis is at an all-time high, federal loan servicers should be supporting borrowers, not deceiving them at every turn. Everyone deserves a fair opportunity to work towards a life without debt.”

Conduent was also found to have violated state and federal laws by:

  • Steering borrowers with federal loans into forbearance instead of an income-based repayment plan
  • Steering borrowers with federal loans into IBR, or forbearance, instead of new and more favorable repayment programs known as Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE)
  • Misinforming borrowers, including servicemembers, that they are ineligible for public service loan forgiveness
  • Unduly delaying borrowers from being able to consolidate their federal loans into Direct Loans
  • Failing to process IBR applications in a timely and accurate manner;
  • Allocating underpayment for certain borrowers in a way that maximized late fees
  • Misapplying borrowers’ payments
  • Failing to properly recalculate monthly payments for servicemembers when adjusting their interest rates under the Servicemember Civil Relief Act
  • Charging improper late fees
  • Failing to notify borrowers of their eligibility for a co-signer release

Conduent. which has wound down its student loan servicing division, has also agreed not to service student loans — except for Perkins loans — for the next five years.

Check Also

House Committee Unanimously Approves Anti-Robocall Bill

As expected, the House Committee on Energy and Commerce unanimously approved the Stopping Bad Robocalls …

Leave a Reply

Your email address will not be published.

X
Skip to toolbar