Student Loan Servicer Agrees to $9m Settlement for Misleading Borrowers

ALBANY N.Y. — A federal student loan servicer has agreed to pay millions of dollars to New Yorkers for steering struggling borrowers away from programs that would have made it easier to repay their debts.

New York Attorney General Letitia James announced Friday that her office along with the Department of Financial Services has settled their lawsuit against ACS Education Services, now known as Conduent Education Services, LLC. The company was also once known as Xerox Education Services.

The company is a federal student loan servicer which handles loan repayments, and was accused of leading distressed borrowers away from available income-based repayment plans toward other, more expensive options. Conduent was also accused of deceiving borrowers over the availability of the Public Service Loan Forgiveness program, which forgives student loan debt after a borrower works for ten years in a public-service job.

Most eligible borrowers in New York will receive between $100 and $450 as part of the settlement.

The DFS and NYAG investigations found that Conduent violated federal and state laws while servicing federal and private student loans by:

Steering borrowers with federal loans into forbearance (a temporrary pause in payments) instead of an income-based repayment plan (IBR)

Steering borrowers with federal loans into IBR, or forbearance, instead of new and more favorable repayment programs known as Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE)

Misinforming borrowers, including servicemembers, that they are ineligible for public service loan forgiveness

Unduly delaying borrowers from being able to consolidate their federal loans into Direct Loans

Failing to process IBR applications in a timely and accurate manner

Allocating underpayment for certain borrowers in a way that maximized late fees

Misinforming delinquent borrowers that they are required to pay both any delinquent amount and the present month’s payment immediately

Misapplying borrowers’ payments

Reporting incomplete and erroneous information to credit reporting agencies

Failing to properly recalculate monthly payments for servicemembers when adjusting their interest rates under the Servicemember Civil Relief Act

Charging improper late fees

Failing to notify borrowers of their eligibility for a co-signer release

According to Financial Services Superintendent Maria Vullo, Conduent will pay a civil penalty of $1 million to the State of New York, and $8 million in restitution to impacted New York consumers. Conduent, which has wound down its student loan servicing business, has agreed not to service student loans (except for Perkins Loans) for five years.

James says ACS has transferred all the private and major federal loans it had been servicing to other servicers, and borrowers should continue to make payments to their current servicers.

Federal student loan borrowers who are having difficulty making their loan payments can call us at 1-833-518-7567 today!

Source: https://cnycentral.com/news/local/new-york-ag-student-loan-servicer-agrees-to-9m-settlement-for-misleading-borrowers