The CFPB released a report highlighting concerns with the servicing of servicemembers’ student loans. The report, “The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform,” identifies a number of specific practices and broader concerns about the conduct of the student loan servicing industry, as it relates to and affects servicemembers. The report addresses common servicing errors that have already led to class action litigation on behalf of servicemember student loan borrowers, such as automatically placing loans into forbearance when a servicemember invokes his or her right under the Servicemembers Civil Relief Act or failing to apply the 6% interest rate cap while a servicemember is on active duty. The report also highlights borrowers’ and loan servicers’ widespread lack of knowledge of and familiarity with the range of benefits available to servicemembers. Student loan servicing practices have drawn increased scrutiny of late from government agencies, such as the CFPB, and also from private litigants who have characterized servicing practices as deceptive. In conjunction with the report, the CFPB released a servicemember student loan servicing guide.
Alert November 13, 2012