The Consumer Financial Protection Bureau yesterday announced an enforcement action against Performant Recovery, Inc., a debt collection agency accused of delaying student loan rehabilitations to increase fees. Performant’s practices, which cost individual borrowers thousands of dollars, have resulted in a $700,000 penalty and a ban on the company from servicing or collecting any student loan debt. To be fair, the company had announced back in 2021 that it was exiting the student loan servicing and collection space.
The CFPB uncovered that between 2015 and 2020, Performant used manipulative tactics to delay the rehabilitation process for borrowers seeking to bring their loans back into good standing. Borrowers who acted promptly within 65 days of default to avoid collection costs were stalled by Performant. Managers instructed agents to “DELAY, DELAY, DELAY” rehabilitation efforts, denying borrowers the opportunity to file forms electronically and instead requiring them to rely on mailed documents — many of which were delayed or never received. This practice forced borrowers to incur collection fees amounting to 16% of their loan balances, along with additional interest.
- Instead of filling out rehabilitation forms electronically over the phone as it did with other borrowers, Performant told certain borrowers that they would need to wait to receive blank forms in the mail — which sometimes never arrived.
- When borrowers called in stating that they had waited a week, as instructed, and still had received no forms, agents responded that the form would need to be mailed again and instructed borrowers to wait another week before calling back. In other cases, Performant used email, fax, and other electronic means to convey documents for borrowers seeking rehabilitations after the 65th day.
Beyond monetary costs, Performant’s actions postponed critical benefits for borrowers, such as restoring federal student aid eligibility, stopping tax refund withholding, and clearing default records from credit reports. These delays created substantial hardships for consumers already grappling with financial difficulties.
CFPB Director Rohit Chopra condemned the scheme, stating, “Performant concocted a scheme to juice their profits by delaying student borrowers their rightful relief. The CFPB is holding Performant accountable for its unlawful debt collection practices.”
Under the consent order, Performant is prohibited from engaging in any activities related to student loan debt collection and must adhere to strict compliance requirements moving forward.