On March 5, 2021, the Washington Attorney General’s Office (AG) announced that a Washington State court ruled against a student loan servicer, finding that the servicer violated the Washington Consumer Protection Act by engaging in unfair and deceptive conduct related to its representations related to a “co-signer release” program.
The partial summary judgment order resolved certain claims stemming from a 2017 lawsuit against the student loan servicer and its predecessor. According to the judge, the company misrepresented this release program, telling borrowers that they could become eligible to remove a co-signer by making a certain number of consecutive, on-time payments on their loans. However, the company did not disclose that lump-sum payments made in advance of the regular due date would disqualify the borrower from co-signer release, even though the account was current.
Several claims from the lawsuit remain unresolved, including allegations that the loan servicer improperly directed financially distressed borrowers into loan forbearance instead of explaining income-based repayment options and that the loan servicer’s predecessor engaged in subprime, predatory lending to students attending certain for-profit colleges.
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