The California Department of Financial Protection and Innovation announced yesterday it had entered into a consent order with one of the nation’s largest student loan servicing companies after it failed to provide contact information in a timely manner for residents with older student loans who needed to apply by the end of the month for an income-driven repayment program.
The DFPI imposed a $27,500 fine on the company, Higher Education Loan Authority of the State of Missouri (MOHELA).
Consumers, including those from California, must apply for the Income-Driven Repayment (IDR) One Time Adjustment by April 30. The adjustment, announced by the Department of Education in April 2022, aims to provide debt relief by crediting borrowers for certain repayment periods that were not previously counted towards loan forgiveness.
MOHELA was the only one among 15 companies contacted by the DFPIA that failed to provide the necessary data on time. This failure resulted in a three-week delay in reaching out to California borrowers, adversely affecting their opportunity to take timely action before the deadline.
DFPI Commissioner Clothilde Hewlett emphasized the commitment to ensuring borrowers receive the necessary information to manage their student loans effectively, especially as benefits such as the IDR One Time Adjustment come to an end. This case marks the first time a state regulator has taken public action against MOHELA for violating state consumer protection laws.
DFPI sent MOHELA a request on February 23, asking for a report with all the names and email addresses of California student loan borrowers with commercially held student loans. It asked that the report be provided by March 8. On March 6, DFPI sent MOHELA a reminder. MOHELA acknowledged the request on March 8. On March 22, DFPI sent MOHELA a notice informing it that if it failed to produce the report by March 25, it would begin facing a daily fine. MOHELA submitted the report on March 25.
