A recent report issued by the Consumer Financial Protection Bureau Private Education Loan Ombudsman recommends actions against scammers who seek to take advantage of and abuse student loan borrowers by offering no-value and sometimes harmful services.
On October 15, the Consumer Financial Protection Bureau Private Education Loan Ombudsman issued its 2019 Annual Report, which actually reports on the Ombudsman’s activity for the past two years, from September 1, 2017 through August 31, 2019. During that period, the Ombudsman handled approximately 20,600 complaints related to private or federal student loans, of which approximately 13,900 related to federal loans and 6,700 to private loans. Each of the last two years saw a significant decrease in the overall volume of complaints.
In addition to statistical reporting, a particular focus of the Report is the Bureau’s efforts to target scam student loan debt relief companies. The Report notes that such companies often (1) misrepresent their services and charge consumers thousands of dollars in monthly and upfront fees without providing promised services; (2) employ aggressive marketing tactics through direct mail, telecommunications, and social media platforms that suggest special expertise in student loan repayment or special access to government programs; (3) characterize themselves as affiliated with the federal government and represent that their fees are necessary for enrollment in income-driven repayment programs, although these programs are available to consumers for free in some cases; (4) purport to “guarantee” customized debt relief solutions, but only offer consolidation of federal loans into direct loans and then enrollment into direct loan repayment programs; or (5) take over consumers’ accounts by requiring consumers to give them their federal student aid personal identification numbers (“FSA PIN”) and changing the consumer’s contact and login information, effectively severing contact between the consumer and their student loan servicer.
The Report contains an appendix “designed to assist market participants and others in informing, educating and empowering consumers regarding student loan debt relief companies.” The Report further notes that some servicers “have been proactive and cooperative in identifying bad actors” by relying on “complaints, account analysis, and internal investigations to identify unscrupulous student loan debt relief companies and learn how they operate,” and then making referrals to appropriate federal and state agencies. In particular, the Report identified the following actions being taken by some servicers in this space:
1. Coordination with federal and state law enforcement authorities to provide information regarding potential unscrupulous student loan debt relief companies, and making appropriate referrals for enforcement action;
2. Contacting borrowers to ensure that they are aware of a potential contact from a student debt relief company and that the services are offered for free through the Department of Education and servicers; and
3. Using social media to inform and educate borrowers and increase their awareness of student debt relief companies and that the services are available for free.
The Report also highlights a number of successful enforcement actions brought by the Bureau, the Federal Trade Commission, Department of Education, and state attorneys general against student loan debt relief companies with judgments totaling hundreds of millions of dollars. In particular, the FTC’s Operation Game of Loans has resulted in settlements and judgments totaling over $131 million for the past two years, while actions by the Bureau have yielded over $17 million in judgments.
The Report concludes with suggestions for policymakers, federal and state law enforcement agencies, and market participants, with a view to formalizing collaborative and cooperative enforcement efforts and expanding enforcement to include criminal actions. These recommendations include (1) sharing of information; (2) sharing data analytic tools; (3) creating task forces; (4) deciding how best to task-organize; and (5) determining how to best synchronize and de-conflict resources and expertise to achieve the maximum benefit for the consumer.
A copy of the full Report can be accessed by clicking here.