Edfinancial lied about student loans, CFPB says

Student Loan Service Provider Edfinancial Services Borrowers lied about their forgiveness and repayment options, the Consumer Financial Protection Bureau said on Wednesday (March 30).

The CFPB therefore sanctions the Tennessee company, ordering it to pay a $1 million penalty and to contact all borrowers and provide them with accurate information.

“Edfinancial’s failure to tell borrowers the full truth so that it can improve its bottom line underscores a systemic problem in credit management,” said CFPB director Rohit Chopra in one press release. “When student loan companies lie about borrower lapse and repayment programs, they are breaking the law.”

Edfinancial officials were not immediately available for comment on Wednesday.

Continue reading: CFPB warns student loan providers against public sector forgiveness

The news comes weeks after the CFPB issued a bulletin warning student loan service providers that they could face sanctions if they mislead borrowers about government-related loan forgiveness programs .

CFPB and US Department of Education officials recently said the practices accused of Edfinancial are part of a broader pattern of student loan service companies misleading borrowers about their eligibility for forgiveness programs.

According to the CFPB, Edfiancial misled borrowers by telling them they were not eligible for student loan forgiveness under the Public Service Loan Forgiveness (PSLF) Act.

This law, which dates back to 2008, states that borrowers who work in the public sector such as the military or local, state, tribal or federal government and some non-profit organizations may be eligible for loan forgiveness.

As PYMNTS previously reported, the federal government estimates that 1.3 million borrowers are eligible for termination of their direct loans because they work in these fields and have made monthly payments for 10 years.

Edfiancnial also did not tell borrowers that they had loans that could be consolidated, according to the CFPB. The company is also accused of misrepresenting to borrowers that some loan forgiveness jobs are not unreadable and mentioning the PSLF Act when discussing loan forgiveness programs.

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