A student loan servicing company will pay a $3.9 million fine for engaging in unfair practices by failing to adjust principal balances of student loans, the federal consumer financial protection agency said Wednesday.
In a release, the Consumer Financial Protection Bureau (CFPB) said it had reached a settlement with the New Jersey-based firm formerly known as ACS Education Services (known, since 2017, as Conduent Education Services, LLC (CES)). The bureau said the company, now known as CES, is “in the process of winding down its business.”
The bureau said it found that CES engaged in unfair practices that violated the Consumer Financial Protection Act of 2010. The firm did so, CFPB said, by failing to adjust in a timely manner principal balances of student loans made under the Federal Family Education Loan Program.
“CES did not make required adjustments to account for circumstances such as deferment, forbearance or the borrowers’ entrance into an Income-Based Repayment program,” the bureau stated. “Loans that required adjustments were placed into queues, and such adjustments were not made, in some cases, for years. As a result, some borrowers paid off loans with inaccurate balances, and some borrowers were unable to consolidate their loans while they waited, sometimes for months, for CES to adjust their principal balances.”
In addition to the civil money penalty of $3.9 million, CES is required, if it has not already done so, to make proper adjustments to the principal balances of the relevant loans or otherwise make restitution to borrowers or any third parties who paid off such loans.