The Pennsylvania Higher Education Assistance Agency (PHEAA), operating under the name American Education Services (AES), is embroiled in a significant legal battle with the Consumer Financial Protection Bureau (CFPB). The CFPB’s lawsuit against AES centers on serious allegations concerning the management of private student loans, particularly those discharged in bankruptcy.
Key Allegations in the Lawsuit
- Ignoring Bankruptcy Discharges: The CFPB claims that AES has failed to implement effective policies or procedures to identify private student loans that have been discharged in bankruptcy. As a result, AES is accused of continuing to treat these discharged loans as active debts, leading to incorrect billing and unnecessary payments from consumers.
- Unfair Practices: AES is alleged to have engaged in unfair, deceptive, and abusive practices by continuing to collect payments on loans that were legally discharged in bankruptcy. This could result in consumers paying thousands of dollars for debts they no longer owe.
- Regulatory Violations: The CFPB asserts that AES’s actions breach the Consumer Financial Protection Act of 2010, which outlaws unfair, deceptive, and abusive practices. Furthermore, AES is accused of violating Regulation V, which enforces the Fair Credit Reporting Act, due to inadequate procedures for reporting debts discharged in bankruptcy.
- Relief Sought: The CFPB is pursuing several forms of relief:
- Injunctive Relief: Orders to stop the alleged unlawful practices.
- Consumer Redress: Compensation for those who have been wrongfully charged.
- Civil Money Penalty: Financial penalties for the alleged infractions.
- Other Appropriate Relief: Any additional measures deemed necessary to address the situation.
PHEAA’s Response
In reaction to the CFPB’s lawsuit, PHEAA has filed a motion to dismiss the case. The agency argues that the CFPB does not have jurisdiction over bankruptcy-related matters. PHEAA contends that the CFPB has issued inconsistent guidance on the discharge ability of loans and is applying retroactive interpretations of the law. Additionally, PHEAA claims that the CFPB’s complaint misrepresents legal standards. The agency is seeking a dismissal of the lawsuit with prejudice, which would prevent the CFPB from pursuing the case further.
What’s at Stake?
The outcome of this legal dispute will have significant implications for AES and its loan servicing practices. If found in violation, AES could face substantial legal and financial consequences and be required to make substantial changes to its practices. This case highlights the critical importance of proper debt management and adherence to regulations, especially regarding bankruptcy discharges.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
Sign Up for the Twice Monthly Newsletter
Just enter your email address at the top orange bar at:
Collection Compliance Experts – “The Power of Expertise: Oversight Perfected”
It’s that easy! Twice a month – we provide blog updates and Resources for the Collection and Industry Professional.
Your email is just for this newsletter. We never sell your information. No fee. Opt-out at any time.
