In what feels like an unfair outcome the Consumer Financial Protection Bureau (CFPB) announced a settlement with Conduent Education Services, LLC (CES), a student loan servicing company that formerly operated under the name of ACS Education Services.
And while the company is winding up operations and this might have been the best outcome the CFPB could get, it just feels like the consumer got screwed again and another student loan servicer just got to walk away paying pennies for a decade of abuse.
According to the consent order the company agreed to the CFPB states:
- Starting in or around 2005, CES was not able to process all its manual adjustments in a timely manner and the company used a system of electronic “queues” to hold loans for later processing. A loan processor who could not process an adjustment manually at the time it arose would create a work ticket and put the loan into a queue.
- In the interim, Affected Loans remained unadjusted with potentially incorrect principal balances, even as the Affected Borrowers’ billing statements would have reflected the forbearance, deferment, or IBR status of those borrowers with respect to monthly payments.
- Over the years, the queues grew. Respondent tracks its loans not individually but by “packets,” each of which contain up to nine loans belonging to the same borrower. Eventually, over 200,000 packets of Affected Loans were in the queues for adjustment.
- From 2005 until 2015, many Affected Loans remained in queues in
Respondent’s systems with principal balances that were incorrect.
- Respondent was also aware that unadjusted Affected Loans that were transferred to other servicers from 2005 to 2015 might have had incorrect balances, but Respondent did not inform the Affected Borrowers or the relevant servicers.
- Similarly, from 2005 to 2015, when Affected Borrowers paid off unadjusted Affected Loans, Respondent was aware that the amounts paid might be incorrect, but failed to inform those Affected Borrowers or correct the balances of those Affected Loans.
The CFPB said, “The Bureau found that CES engaged in unfair practices that violated the Consumer Financial Protection Act of 2010 by failing to adjust in a timely manner principal balances of student loans made under the Federal Family Education Loan Program. CES did not make required adjustments to account for circumstances such as deferment, forbearance or the borrowers’ entrance into an Income-Based Repayment program. Loans that required adjustments were placed into queues, and such adjustments were not made, in some cases, for years. As a result, some borrowers paid off loans with inaccurate balances, and some borrowers were unable to consolidate their loans while they waited, sometimes for months, for CES to adjust their principal balances.
Among other things, the consent order requires that CES, if it has not already done so, make proper adjustments to the principal balances of the relevant loans or otherwise make restitution to borrowers or any third parties who paid off such loans. The order also requires CES to pay a $3.9 million fine.”