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ARTICLE · 19 DECEMBER 2024

CFPB Bans Debt Collection Agency Over Student Loan Abuses

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On December 9, the CFPB entered into a consent order with a debt collection agency for alleged unlawful student loan debt collection practices against defaulted borrowers.

United StatesFinance and Banking
A.J. Dhaliwal
A.J. Dhaliwal
Mehul Madia
Mehul Madia
Maxwell Earp-Thomas
Maxwell Earp-Thomas
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On December 9, the CFPB entered into a consent order with a debt collection agency for alleged unlawful student loan debt collection practices against defaulted borrowers.The debt collection agency's allegedly improper practices included delaying borrowers' loan rehabilitation processes to generate and collect fees that cost individual borrowers thousands of dollars. These actions were in violation of the CFPA's prohibitions on unfair and abusive acts or practices and the FDCPA.See 12 U.S.C. §§ 5563, 5565;15 U.S.C. § 1692l(b)(6).

The company collected on student loan debt, including from borrowers who had defaulted on Federal Family Education Loan Program (FFELP) loans. Under FFELP, defaulting borrowers have a one-time right to rehabilitate their loans and bring them back into good standing by entering into a loan rehabilitation agreement, under which they make a series of reasonable and affordable payments. Collection costs for rehabilitations and other fees

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