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Domino: A Blog About Student Debt How a Data Company at the Center of the Student Loan System is Costing Borrowers Millions

How a Data Company at the Center of the Student Loan System is Costing Borrowers Millions

How a Data Company at the Center of the Student Loan System is Costing Borrowers Millions

By Mike Pierce | January 28, 2020

Every day, consumer reporting companies across the country collect information and produce reports about hundreds of millions of Americans. These reports are provided to or bought by other companies and used to determine access to credit, employment, housing, insurance, and more. The information contained in the reports significantly impacts millions of people’s lives. Consequently, federal law protects all consumers and gives them the right to access these reports, dispute inaccurate information, and have errors investigated and corrected in a timely manner.

In the student loan system, however, millions of borrowers have been denied access to some of these important rights.

A data company at the center of the student loan system

Each month, a company at the center of the student loan system called the National Student Clearinghouse collects and maintains  data on roughly 97% of all students enrolled in colleges and universities in America, or more than 19.5 million people. This includes information about students’ college enrollment status, whether they graduated, and what degree they received. These records are packaged and sold as reports to student loan companies, big banks, insurance companies,  employers and more—companies looking to verify whether a student has finished college or is currently enrolled.

Companies use these reports for a variety of uses, but for tens of millions of current and former students, this information helps determine when student loan repayment begins and drives how student loan interest charges are calculated.

In the past, federal regulators found that reports containing faulty information were used by student loan companies to manage millions of borrowers’ accounts. When reports contain errors, it can lead to higher loan costs for borrowers and may contribute to student loan delinquency, default,  and loss of student loan benefits. For students scraping to get by, it can add up to thousands of dollars. Unfortunately, new evidence suggests that the company created roadblocks for borrowers who sought to find out the information contained in their own reports, and it appears there is no clear process for people to identify, dispute, or remedy costly mistakes. This is something all consumer reporting companies are required by law to do.

As a result of a recent lawsuit, the company agreed to make changes to the way current and former students access their own reports, further making the case that the National Student Clearinghouse is a consumer reporting company. This is a big step forward, but tens of millions of current and former students are still denied important rights to correct their data and seek justice when errors occur.

Current and former students fight for their rights in court, win $2 million in relief

A new settlement was announced this month between the National Student Clearinghouse and James Robinson, a former student from Boston who sued on behalf of himself and a class of thousands of current and former students who were charged $30 by the company when seeking to obtain a copy of their reports.  In short, thousands of students across the country reached out to National Student Clearinghouse to find out what personal information the company had compiled about them to sell to banks and other businesses.  These students were told that, to access reports about themselves, they needed to pay the company nearly $30–which Robinson argued was in violation of federal and state consumer laws. 

The settlement in Robinson v. National Student Clearinghouse wasn’t small change– thanks to the hard work of the National Consumer Law Center and Justice Catalyst who brought this lawsuit on behalf of Robinson and other borrowers, tens of thousands of students who were overcharged will get nearly two million dollars back.  But, by bringing new evidence this company’s practices into the public record, the implications of this settlement are much broader, and they touch tens of millions of current and former students across the country.

What this means for all current and former students

This case underscores that National Student Clearinghouse has all of the markers of a consumer reporting Agency–just like Equifax, TransUnion, or Experian. It collects information about tens of millions of students and makes millions of dollars selling reports containing that information to third parties. Based on our analysis of public tax filings by, last year alone, this company made more than $50 million, in part by selling these reports about current and former students.

Unfortunately, the company continues to claim it is above the law, denying that it is a consumer reporting agency or that it must follow federal consumer financial protection rules. In the settlement agreement between Robinson and National Student Clearinghouse, the company states, “NSC vigorously denies…that it is a consumer reporting agency and that the FCRA…appl[ies] to it or its business practices…”

As a credit reporting agency, tens of millions of current and former students have the right under federal consumer protection law (called the Fair Credit Reporting Act) to hold the company accountable for the accuracy of the consumer reports it sells to big banks, insurance companies, and employers. 

Unfortunately, the company continues to claim it is above the law, denying that it is a consumer reporting agency or that it must follow federal consumer financial protection rules. In the settlement agreement between Robinson and National Student Clearinghouse, the company states, “NSC vigorously denies…that it is a consumer reporting agency and that the FCRA…appl[ies] to it or its business practices…”

This means millions of students are being denied the important rights guaranteed under this law, including the right to dispute incorrect information contained in reports, the right have costly errors fixed, and the right to take the company to court if it sells inaccurate information to other businesses.

What happens next?

The Consumer Financial Protection Bureau (CFPB) is the federal agency responsible for overseeing credit reporting companies like the National Student Clearinghouse to ensure compliance with federal consumer financial protections.

That’s why we’re sending a letter to CFPB Director Kathy Kraninger demanding that the Bureau immediately take steps to oversee and ensure National Student Clearinghouse complies with the federal consumer financial protection laws that govern credit reporting companies.

The federal agency also publishes a comprehensive list each year of consumer reporting companies which includes key information for consumers to access and exercise their rights. The National Student Clearinghouse should be added to this list.

This company’s practices affect tens of millions of current and former students, determining, for example, how much interest borrowers get charged on their student loans, when their loan bills come due.  This data is also used by employers and businesses to verify whether borrowers’ graduated from college, making it a key link in employment decisions for borrowers across the country.  It’s time for CFPB to shine a light on one of the darkest corners of the marketplace and stand up for students, student loan borrowers and their families.

UPDATE-Final-Clearinghouse-Letter-to-CFPB-01272020

At the same, time National Student Clearinghouse should immediately take steps to comply with federal consumer laws and honor the rights of current and former students by providing access to them to dispute and resolve costly errors. Consumers are entitled to this under the law.

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Mike Pierce is the Policy Director and Managing Counsel at the Student Borrower Protection Center. He is an attorney, advocate, and former senior regulator who joined SBPC after more than a decade fighting for student loan borrowers’ rights on Capitol Hill and at the Consumer Financial Protection Bureau.

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