EdFinancial misled borrowers to pad profits, CFPB says
Knoxville, Tennessee-based student loan servicing company Edfinancial is facing sanctions and a $1 million fine for misleading student loan borrowers and failing to provide them with accurate information about loan repayment options. According to the Consumer Financial Protection Bureau (CFPB) the deceptive acts padded Edfinancial's profit margins while student loan borrowers repaid more than they should have.
“Edfinancial’s failure to tell the full truth to borrowers, so it could pad its bottom line highlights a systemic problem with loan servicing,” said CFPB Director Rohit Chopra. “When student loan companies lie about cancellation and repayment programs for borrowers, they are breaking the law.”
In its investigation of Edfinancial's practices, the CFPB found:
Edfinancial encouraged borrowers to reach out to it for help managing their student loans, and it indicated that it was an expert and could assist borrowers navigating complex student-loan repayment options. FFELP borrowers reasonably relied on Edfinancial to act in their best interests by providing them with complete and accurate information about how to qualify for PSLF and about all the available forgiveness options.
FFELP is the Federal Family Educational Loan Program.
PSLF is the Public Service Loan Forgiveness program.
According to CFPB:
When borrowers with FFELP loans asked about PSLF, Edfinancial, in many instances, told them they were ineligible, and the company did not tell them they could become eligible by consolidating their loans into Direct Loans and meeting other qualifying requirements. Sometimes, Edfinancial falsely told borrowers their FFELP loans could not be consolidated. These statements, misrepresentations, and omissions created the false impression for borrowers with FFELP loans that they could not obtain PSLF.
Edfinancial, in both explicit and implicit statements, told borrowers that their payments on FFELP loans would count toward the 10 years of monthly payments required to obtain PSLF. Many borrowers were likely led to believe they were making progress toward PSLF when they in fact were not because they had not consolidated their FFELP loans into Direct Loans.
As a result of the deceptive and misleading statements, borrowers paid more money than they should have on their student loans resulting in higher profits for Edfinancial. Had the borrowers taken advantage of the PSLF program, they would have repaid less, thus reducing Edfinancial's fees.