The Student Borrower Protection Center (SBPC) sent a letter to the Consumer Financial Protection Bureau (CFPB) to highlight new evidence of illegal conduct by Guaranty Agencies and to call on CFPB to protect borrowers. As the letter details, documents that the SBPC uncovered through state and federal open records requests indicate that Guaranty Agencies may have actively worked against borrowers’ best interests and ignored clear guidance that the Department of Education issued to ease debt burdens exacerbated by the COVID-19 emergency.
Guaranty Agencies are student loan companies that insure, service, and collect on student loans, surviving as relics of the now-defunct Federal Family Education Loan Program (FFELP). Many of these companies have recently come under investigation by the CFPB for harmfully misleading borrowers.
Since May, 20201, Guaranty Agencies have been tasked with implementing relief for defaulted borrowers owing on certain older federal student loans who had previously been cut out of pandemic-related relief. The findings outlined in the SBPC’s letter show that Guaranty Agencies continued to take from defaulted borrowers’ paychecks even after being explicitly ordered to halt this practice, and that Guaranty Agencies refused or failed to return millions in illicitly seized wages to borrowers.
Read more on SBPC’s advocacy related to the lack of protections for many FFELP borrowers during the pandemic here.