On September 29, 2022, the CFPB released a special edition of Supervisory Highlights on recent examination findings covering the practices of student loan servicers, and schools that lend to students directly. During supervisory examinations, the CFPB found that these schools had improper blanket policies of withholding transcripts to force students to make payments. The CFPB’s exams also found that student loan servicers illegally hampered borrowers’ access to federal student loan payment relief and cancellation programs including Income-Driven Repayment, Public Service Loan Forgiveness and Teacher Loan Forgiveness.
Earlier this year, the CFPB announced that it will begin examining the operations of post-secondary schools and subsequently updated its exam procedures to include a new section on institutional student loans. According to the CFPB, many in-house lenders employ a practice of withholding transcripts when a student borrower has an outstanding debt and the bureau found that the blanket withholding of transcripts to pressure borrowers is an abusive practice under the Consumer Financial Protection Act.
The CFPB also found cases of federal loan servicers improperly denying borrower applications for loan cancellation through Teacher Loan Forgiveness or Public Service Loan Forgiveness. According to the CFPB’s report, servicers illegally misrepresented borrowers’ eligibility dates and the number of payments the borrower needed to make to qualify for relief. Servicers also provided misinformation about borrowers’ entitlement to progress toward loan forgiveness during the pandemic payment suspension. The Bureau has directed servicers to remediate the said issues and will continue to monitor servicers’ student loan practices.
The CFPB’s full press release can be found here.