Consumer complaint received 2020-05-11
Product: Credit reporting, credit repair services, or other personal consumer reports — Credit reporting
Issue: Incorrect information on your report — Information belongs to someone else
Company: TRANSUNION INTERMEDIATE HOLDINGS, INC. (TX)

CFPB Sues Nation 's Largest Student Loan Company XXXX  for Failing Borrowers at Every Stage of Repayment XXXX Formerly Part of XXXX XXXX, Illegally Cheated Borrowers Out of Repayment Rights Through Shortcuts and Deception XX/XX/XXXX XXXX XXXX XXXX WASHINGTON, D.C. Today the Consumer Financial Protection Bureau ( CFPB ) is suing the nations largest servicer of both federal and private student loans for systematically and illegally failing borrowers at every stage of repayment. For years, XXXX, formerly part of XXXX XXXX, created obstacles to repayment by providing bad information, processing payments incorrectly, and failing to act when borrowers complained. Through shortcuts and deception, the company also illegally cheated many struggling borrowers out of their rights to lower repayments, which caused them to pay much more than they had to for their loans. The Bureau seeks to recover significant relief for the borrowers harmed by these illegal servicing failures. 

" For years, XXXX failed consumers who counted on the company to help give them a fair chance to pay back their student loans, '' said CFPB Director XXXX XXXX. " At every stage of repayment, XXXX chose to shortcut and deceive consumers to save on operating costs. Too many borrowers paid more for their loans because XXXX illegally cheated them and today 's action seeks to hold them accountable. '' Formerly part of XXXX XXXX XXXX XXXX, XXXX is the largest student loan servicer in the United States. It services the loans of more than 12 million borrowers, including more than 6 million accounts under its contract with the Department of Education. Altogether, it services more than {$300.00} billion in federal and private student loans. Named in todays lawsuit are XXXX XXXX and two of its subsidiaries : XXXX XXXX is a division responsible for loan servicing operations ; XXXX XXXX XXXX specializes in the collection of defaulted student loans. 

Servicers are a critical link between borrowers and lenders. They manage borrowers accounts, process monthly payments, and communicate directly with borrowers. When facing unemployment or other financial hardship, borrowers rely on their student loan servicer to help them enroll in alternative repayment plans or request a modification of loan terms. A servicer is often different from the lender, and borrowers typically have no control over which company is assigned to service their loans. 

Starting in XXXX, the vast majority of federal student loan borrowers gained a right to make payments based on how much money they earn by enrolling in repayment arrangements known as income-driven repayment plans. These plans are part of the federal governments effort to make student loans more affordable. For borrowers who meet certain income and family-size criteria, these plans can offer monthly payments as low as zero dollars. Another important benefit of income-driven repayment plans is that for the first three years after enrollment, many consumers are entitled to have the federal government pay part of the interest charges if they cant keep up. All federal student loan borrowers enrolled in these plans may be eligible for loan forgiveness after 20 or 25 years of monthly payments.

In todays action, the Bureau alleges that XXXX has failed to provide the most basic functions of adequate student loan servicing at every stage of repayment for both private and federal loans. XXXX provided bad information in writing and over the phone, processed payments incorrectly, and failed to act when borrowers complained about problems. Critically, it systematically made it harder for borrowers to obtain the important right to pay according to what they can afford. These illegal practices made paying back student loans more difficult and costly for certain borrowers. Specifically, among the allegations in todays lawsuit, the Bureau charges that XXXX : Fails to correctly apply or allocate borrower payments to their accounts : As soon as a borrower begins to pay back their loans, student loan servicers are supposed to take a borrowers payment and follow instructions from the borrower about how to apply it across their multiple loans. XXXX repeatedly misapplies or misallocates payments often making the same error multiple times over many months. The company all too often fails to correct its errors unless a consumer discovers the problem and contacts the company. 
Steers struggling borrowers toward paying more than they have to on loans : When borrowers run into trouble repaying their federal student loans, they have a right under federal law to apply for repayment plans that allow for a lower monthly payment. But the Bureau believes that XXXX steers many borrowers into forbearance, an option designed to let borrowers take a short break from making payments. But interest continues to add up during forbearance. Certain consumers with subsidized loans end up paying a heavy price because they could have potentially avoided those interest charges. From XX/XX/XXXX to XX/XX/XXXX, the company added up to {$4.00} billion in interest charges to the principal balances of borrowers who were enrolled in multiple, consecutive forbearances. The Bureau believes that a large portion of these charges could have been avoided had XXXX followed the law. 
Obscured information consumers needed to maintain their lower payments : Borrowers who successfully enroll in an income-driven repayment plan need to recertify their income and family size annually. But XXXX emails and annual renewal notice sent to borrowers failed to adequately inform them of critical deadlines or the consequences if they failed to act. XXXX also obscured its renewal notices in emails sent to borrowers that did not adequately alert them about the need to renew. Many borrowers did not renew their enrollment on time and they lost their affordable monthly payments, which could have caused their monthly payments to jump by hundreds or even thousands of dollars. When that happens, accrued interest is added to the borrowers principal balance, and these borrowers may have lost other protections, including interest subsidies and progress toward loan forgiveness. 
Deceived private student loan borrowers about requirements to release their co-signer from the loan : XXXX told borrowers that they could apply for co-signer release if they made a certain number of consecutive, on-time payments. Even though it permits borrowers to prepay monthly installments in advance and tells customers who do prepay that they can skip upcoming payments, when borrowers did so, XXXX reset the counter on the number of consecutive payments they made to zero. So borrowers who tried to get ahead of their loans and prepay would have been denied co-signer release and had to start over. 
Harmed the credit of XXXX borrowers, including severely injured veterans : Student loan payments are reported to credit reporting companies. Severely and permanently XXXX borrowers with federal student loans, including veterans whose XXXX is connected to their military service, have a right to seek loan forgiveness under the federal Total and XXXX XXXX discharge program. XXXX misreported to the credit reporting companies that borrowers who had their loans discharged under this program had defaulted on their loans when they had not. This potentially caused damage to their credit reports. 
The Bureau also alleges that XXXX, through its subsidiary XXXX, made illegal misrepresentations relating to the federal loan rehabilitation program available to defaulted borrowers. XXXX misrepresented the effect of completing the federal loan rehabilitation program by falsely stating or implying that doing so would remove all adverse information about the defaulted loan from the borrowers credit report. XXXX also misrepresented the collection fees that would be forgiven upon completion of the program. 

Todays lawsuit alleges that XXXX has been in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Fair Credit Reporting Act, and the Fair Debt Collections Practices Act. The suit seeks redress for consumers harmed by XXXX illegal practices. The CFPB is also seeking to keep XXXX from continuing the illegal conduct described in the complaint, and to prevent new borrowers from being harmed.