October 31, 2014

Student-Loan Servicers Are Often ‘Unfair’ to Borrowers, U.S. Finds

Report: “Supervisory Highlights”

Summary: Earlier this month, in the third annual report of its student-loan ombudsman, the bureau reported that private loan servicers aren’t doing much to help borrowers understand their repayment options. Well, here’s more bad news: Some of those servicers are doing a bunch of “unfair” and legally dubious things, too.

Most notably, they’re doing what they can to make as much money as possible off of delinquent borrowers. Here’s how: When a borrower has multiple loans, they’re typically combined into one omnibus account with a single monthly payment. If a payment comes in at less than the total amount due, “one or more servicers” allocate that amount proportionally to each loan. That means every loan is delinquent, and every loan thereby incurs a late fee. Under the terms of the Dodd–Frank Wall Street Reform and Consumer Protection Act, that’s forbidden.

Other findings:

Some servicers mislead borrowers by telling them that student loans are not dischargeable in bankruptcy. In truth, the loans are hard to discharge, but it’s absolutely possible to do so.
“One or more servicers” have artificially inflated the minimum amount due each payment period.
And then there’s the illegal debt-collection calls: “Examiners found that one or more student-loan servicers routinely made debt-collection calls to delinquent borrowers early in the morning or late at night.”

Bottom Line: Student-loan servicing continues to be a Wild West of sorts. Try not to act too shocked.

The above statements do not represent those of Weston Legal or Michael Weston and they have not been reviewed for accuracy. The statements have been published by a third party and are being linked to by our website only because they contain information relating to debt. Nothing in this article should be construed as legal advice given by Weston Legal or Michael Weston. To view the source of the article, please following the link to the website that published the article. Articles written by Michael W. Weston can be viewed here: To report any problem with this article please email



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