On September 18, the U.S. District Court for the District of Puerto Rico issued a consent judgement and order to resolve a dispute between the Commonwealth of Puerto Rico and a consumer lending company. According to the order, the judgment was entered without trial or adjudication of fact or law and does not constitute an admission of wrongdoing by defendant. The order also noted that the lending company had already developed and implemented many of the servicing practices set forth in the consent judgment.
In this case, Puerto Rico, through its Attorney General (AG), claimed the defendant exploited student loan borrowers through deceptive, unfair and predatory lending practices. Further, the AG alleged the defendant had failed to provide required disclosures and violated consumer protection laws. Among the allegations, the defendant was accused of issuing unaffordable loans to student borrowers; misapplying payments; providing misleading information about the terms, repayment options and the benefits of the loans; employing unfair practices that took advantage of borrowers’ financial vulnerabilities (like imposing excessive fees); and misrepresenting the services provided and claimed falsely it could offer better loan terms. Further, the defendant allegedly steered struggling borrowers into costly forbearances and failed to inform certain borrowers about recurring paperwork needs.
Under the order, the defendant is required to implement practices to ensure accurate payment processing, provide clear billing statements, and maintain transparency in payment allocation. Specific provisions are outlined for handling federal loans, including informing borrowers about alternative repayment plans, and providing specialized assistance for Public Service Loan Forgiveness (PSLF) programs. The defendant is prohibited from charging certain fees, such as fees for entering forbearance or processing payments. Detailed requirements for billing statements and payment histories were also provided.
The order requires that the defendant maintain policies to inform borrowers about repayment options and provide accurate information regarding PSLF and other forgiveness programs. Enhanced training for customer service specialists is required and the defendant has agreed to discharge and forgive a minimum of $7,660,000 in private education loan. Additionally, the defendant will pay a settlement amount of $940,000 to Puerto Rico related to the practices addressed in the consent judgment. Puerto Rico has agreed to release defendant from all civil claims related to the covered conduct prior to the effective date of the judgment but does not impact potential claims by the CFPB or other regulatory bodies. The court’s consent judgment applies to all federal and private education loans serviced by the defendant.
