For more information, please visit www.lenderlawwatch.com or www.enforcementwatch.com 17 against her by denying her a student loan based on her citizenship status. In August, a federal judge held that the immigrant alleged claims under federal and California discrimination laws, and allowed most of the case to proceed. This decision is important because the court gives some weight to the theory that denying a loan based on a borrower’s immigration status could be discriminatory where federal law protects that individual from deportation. CFPB Settles with Private Equity Firm That Facilitated Private College’s Participation in Federal Loan Programs. In August, the CFPB filed a complaint and proposed settlement with Aequitas Capital Management, an Oregon private equity firm, that the CFPB alleged purchased or funded some of Corinthian College’s private student loans to make it appear that Corinthian was eligible for federal student loan funds by receiving external revenue. The CFPB alleged that, in fact, Corinthian Colleges paid Aequitas Capital to enact the charade in order to maintain its students’ access to federal loan programs. Nearly 41,000 students could be eligible for approximately $183.3 million in loan forgiveness and reduction under the settlement. Massachusetts Attorney General Sues Servicer Over Public Service Loan Forgiveness. In August, the Massachusetts Attorney General sued the Pennsylvania Higher Education Assistance Agency (PHEAA), one of the nation’s largest servicers, alleging that it deprived public servants of relief under the Public Service Loan Forgiveness (PSLF) Program, a federal student loan forgiveness program. The lawsuit alleges that, among other practices, the loan servicer misprocessed borrowers’ applications for income-driven repayment plans and miscalculated borrowers’ qualifying payments. This action is a reminder that state attorneys general can and do enforce certain federal statutes, including the CFPA. LOOKING AHEAD TO 2018 Student loan servicing is likely to remain in the crosshairs of the CFPB. The CFPB focused on student loan servicing in its April Supervisory Highlights, and noted that two student loan servicing practices were particularly concerning. First, it noted servicers sometimes receive incorrect information about students’ enrollment status, causing premature termination of deferment status and a failure to reimburse fees and interest charges after the error is discovered. Second, the CFPB noted that some servicers provide misleading information about how interest is capitalized during successive deferment periods, and make it appear that all interest is capitalized at once, rather than at the end of each deferment period. The CFPB’s focus on these issues may signal future enforcement actions as to lenders’ treatment of accounts in deferral. State attorneys general may also use new tools at their disposal to target student loan services. As more states pass student loan bills of rights, lenders may seek protection from these state laws. In July, the National Council of Higher Education submitted a letter to the U.S. Department of Education requesting guidance as to whether such laws were preempted for loans made under federal student lending programs. Regardless of the answer, student lenders are likely to challenge these new laws in federal court on preemption grounds. Even if such challenges are successful however, state enforcement agencies can rely on the CFPA and UDAP/UDAAP statutes to pursue student loan servicers. WHAT TO WATCH CFPB focus on student loan servicing | U.S. Department of Education’s response on student loan bills of rights | Increased litigation over student loan forgiveness programs RDS TELEPHONE CONSUMER PROTECTION ACT CONSUMER FINANCIAL & PROTECTION BUREAU STUDENT LENDING DEBT COLLECTION