Rule2022-04266
Bulletin 2022-03: Servicer Responsibilities in Public Service Loan Forgiveness Communications
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
March 1, 2022
Issuing agencies
Consumer Financial Protection Bureau
Abstract
The Consumer Financial Protection Bureau (CFPB) is issuing this Compliance Bulletin and Policy Guidance (Bulletin) regarding the servicing of Federal student loans, including Federal Family Education Loan Program and Perkins loans, for borrowers who may be eligible for Public Service Loan Forgiveness (PSLF). The Limited PSLF Waiver announced by the Department of Education on October 6, 2021 (PSLF Waiver) significantly changes the program's eligibility criteria for a limited period. In communicating with borrowers about the PSLF program, servicers should consider taking certain actions to ensure compliance with the Dodd-Frank Wall Street Reform and Consumer Protection Act's (Dodd-Frank Act's) prohibition on unfair, deceptive, or abusive acts or practices (collectively, UDAAPs). In its oversight, the CFPB will be paying particular attention to whether student loan servicers provide complete and accurate information to consumers about the benefits they can receive under the PSLF Waiver and eligibility for PSLF generally.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 40 (Tuesday, March 1, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 40 (Tuesday, March 1, 2022)]
[Rules and Regulations]
[Pages 11286-11289]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-04266]
=======================================================================
-----------------------------------------------------------------------
BUREAU OF CONSUMER FINANCIAL PROTECTION
12 CFR Chapter X
Bulletin 2022-03: Servicer Responsibilities in Public Service
Loan Forgiveness Communications
AGENCY: Bureau of Consumer Financial Protection.
ACTION: Compliance bulletin and policy guidance.
-----------------------------------------------------------------------
SUMMARY: The Consumer Financial Protection Bureau (CFPB) is issuing
this Compliance Bulletin and Policy Guidance (Bulletin) regarding the
servicing of Federal student loans, including Federal Family Education
Loan Program and Perkins loans, for borrowers who may be eligible for
Public Service Loan Forgiveness (PSLF). The Limited PSLF Waiver
announced by the Department of Education on October 6, 2021 (PSLF
Waiver) significantly changes the program's eligibility criteria for a
limited period. In communicating with borrowers about the PSLF program,
servicers should consider taking certain actions to ensure compliance
with the Dodd-Frank Wall Street Reform and Consumer Protection Act's
(Dodd-Frank Act's) prohibition on unfair, deceptive, or abusive acts or
practices (collectively, UDAAPs). In its oversight, the CFPB will be
paying particular attention to whether student loan servicers provide
complete and accurate information to consumers about the benefits they
can receive under the PSLF Waiver and eligibility for PSLF generally.
DATES: This bulletin is applicable on March 1, 2022.
FOR FURTHER INFORMATION CONTACT: Matt Liles, Counsel, Office of
Supervision Policy at 202-435-7435 or Carolyn Hahn, Senior Counsel,
Office of Enforcement at 202-435-7212. If you require this document in
an alternative electronic format, please contact
<a href="/cdn-cgi/l/email-protection#de9d988e9c819fbdbdbbadadb7bcb7b2b7aaa79ebdb8aebcf0b9b1a8"><span class="__cf_email__" data-cfemail="c98a8f998b9688aaaaacbabaa0aba0a5a0bdb089aaafb9abe7aea6bf">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
Student debt in the United States recently topped over $1.75
trillion. PSLF is a benefit provided by Congress to Federal student
loan borrowers to earn forgiveness of their Federal student loans after
10 years of public service. The U.S. Department of Education estimates
that over 1.3 million student loan borrowers work in jobs that qualify
for PSLF; moreover, hundreds of thousands of these borrowers have
expressed interest in PSLF by filing forms to certify their public
service employment.\1\
---------------------------------------------------------------------------
\1\ PSLF Report, September 2021 available at <a href="https://studentaid.gov/sites/default/files/fsawg/datacenter/library/pslf-sep2021.xls">https://studentaid.gov/sites/default/files/fsawg/datacenter/library/pslf-sep2021.xls</a>.
---------------------------------------------------------------------------
The CFPB's supervisory work has revealed unfair or deceptive
practices by student loan servicers that prevented many borrowers from
making progress towards forgiveness. Accordingly, the CFPB is issuing
this Bulletin to highlight the significant changes to PSLF eligibility
criteria under the new waiver and the CFPB's supervision and
enforcement priorities with respect to PSLF and the PSLF Waiver.
The Public Service Loan Forgiveness Program
To qualify for PSLF under the original requirements, a borrower had
to make 120 on-time payments on a Direct Loan, while on a qualifying
repayment plan, and while working in a qualifying public service
job.\2\ In 2018, Congress created Temporary Expanded Public Service
Loan Forgiveness (TEPSLF) which allows some borrowers to qualify for
forgiveness based on payments made under repayment plans that were
previously ineligible.
---------------------------------------------------------------------------
\2\ 34 CFR 685.219(c).
---------------------------------------------------------------------------
The PSLF Waiver
In October 2021, in response to the COVID-19 national emergency,
the Department of Education announced a temporary easing of some PSLF
program requirements to help many previously ineligible borrowers
receive forgiveness based on their qualifying public service employment
regardless of their loan type or repayment plan.\3\ Importantly, the
PSLF Waiver allows borrowers with Federal Family Education Loan Program
(FFELP) and Perkins loans to consolidate into a Direct Loan and receive
credit toward loan forgiveness under PSLF for periods of repayment on
the earlier loan(s). It also provides the same benefit to existing
Direct Consolidation Loan borrowers resulting
[[Page 11287]]
in the forgiveness of tens of thousands of borrowers' loans
automatically.\4\ The PSLF Waiver credits any month that a Federal
student loan borrower worked in public service and was in active
repayment towards the 120 payments required for PSLF. The PSLF Waiver
is intended to address several common problems borrowers have
experienced in obtaining loan forgiveness, including where the
borrower:
---------------------------------------------------------------------------
\3\ See Press Release, Federal Student Aid, Public Service Loan
Forgiveness Limited Waiver Opportunity, available at <a href="https://studentaid.gov/announcements-events/pslf-limited-waiver">https://studentaid.gov/announcements-events/pslf-limited-waiver</a>.
\4\ See Press Release, Federal Student Aid, U.S. Department of
Education Announces Transformational Changes to the Public Service
Loan Forgiveness Program, Will Put Over 550,000 Public Service
Workers Closer to Loan Forgiveness, available at <a href="https://www.ed.gov/news/press-releases/us-department-education-announces-transformational-changes-public-service-loan-forgiveness-program-will-put-over-550000-public-service-workers-closer-loan-forgiveness">https://www.ed.gov/news/press-releases/us-department-education-announces-transformational-changes-public-service-loan-forgiveness-program-will-put-over-550000-public-service-workers-closer-loan-forgiveness</a>
(estimating these borrowers will discharge $1.74 billion in student
loan debt).
---------------------------------------------------------------------------
<bullet> Worked in a qualifying public service job but had Federal
loans that were not Direct Loans;
<bullet> made payments on a Direct Loan while working in a
qualifying public service job, but not on a qualified repayment plan;
<bullet> made payments on a Direct Loan while working in a
qualifying public service job and on a qualifying repayment plan, but
made underpayments or late payments;
<bullet> made 120 qualifying payments while working in public
service but applied for forgiveness after having left public service;
\5\ or
---------------------------------------------------------------------------
\5\ PSLF requires borrowers to not only work in public service
when they make the 120 qualifying payments, but also when they apply
for forgiveness and when it is granted. 34 CFR 685.219(c)(1)(ii)(B-
C).
---------------------------------------------------------------------------
<bullet> was a member of the military who did not receive credit
for periods of deferment or forbearance while serving on active duty.
The impact of the PSLF Waiver could be large and far-reaching. But
many borrowers who could benefit under the PSLF Waiver will need to
take affirmative action before the October 31, 2022 deadline. To take
advantage of the PSLF Waiver, borrowers without Direct Loans (such as
Perkins loans or FFELP loans) must consolidate into a Direct
Consolidation Loan and then file a PSLF form certifying their previous
public service employment. Most borrowers who have Direct Loans and
want credit for previously non-qualifying payments will need to file
PSLF forms certifying their previous periods of public service
employment. The Department of Education estimates that 27,000 Direct
Loan PSLF borrowers could receive $2.82 billion in forgiveness merely
by certifying periods of prior public service employment that were
previously ineligible.\6\
---------------------------------------------------------------------------
\6\ Press Release supra n. 4.
---------------------------------------------------------------------------
II. Unfair and Deceptive Acts or Practices Related to PSLF
The CFPB has authority to oversee student loan servicing, including
citing servicers for unfair, deceptive, or abusive acts or
practices.\7\ As described in previous Supervisory Highlights, CFPB
examiners have uncovered deceptive student loan servicing practices,
including the following with respect to PSLF.
---------------------------------------------------------------------------
\7\ See title X of the Dodd-Frank Wall Street Reform and
Consumer Protection Act Public Law 111-203, 124 Stat. 1376 (2010)
(establishing the CFPB's authority). Under the Dodd-Frank Act, all
covered persons or service providers are prohibited from committing
unfair, deceptive, or abusive acts or practices in violation of the
Act. An act or practice is unfair when (i) it causes or is likely to
cause substantial injury to consumers; (ii) the injury is not
reasonably avoidable by consumers; and (iii) the injury is not
outweighed by countervailing benefits to consumers or to
competition. Id. at sections 1031, 1036; 12 U.S.C. 5531, 5536.
Whether an act or practice is deceptive is informed by decades of
precedent involving Section 5 of the Federal Trade Commission Act.
See CFPB Exam Manual at UDAAP 5.
---------------------------------------------------------------------------
Deceptive Statements to FFELP Borrowers About Consolidating Into a
Direct Loan
Prior to the PSLF Waiver, only payments made on Direct Loans
qualified for progress towards loan forgiveness under PSLF.\8\ Any
payment a borrower made on other types of Federal loans--such as
Perkins Loans or FFELP loans--did not count towards the 120 payments
required to achieve forgiveness. Instead, to pursue PSLF, Federal
student loan borrowers who did not have Direct Loans had to first
consolidate those loans into a Direct Consolidation Loan before their
payments would begin to count towards forgiveness. Thus, prior to the
PSLF Waiver, borrowers could convert their FFELP or Perkins loans into
Direct Consolidation Loans to benefit under the PSLF program.
---------------------------------------------------------------------------
\8\ 34 CFR 685.219(c)(1)(iii).
---------------------------------------------------------------------------
CFPB examiners have determined that servicers misled borrowers
about their loan's PSLF eligibility.\9\ For example, examiners have
found that servicers committed a deceptive practice by leading FFELP
borrowers to believe that they had no potential course of action to
become eligible for PSLF, when the borrowers could consolidate their
FFELP loans into a Direct Consolidation Loan and pursue PSLF.\10\
---------------------------------------------------------------------------
\9\ If a supervisory matter is referred to the Office of
Enforcement, Enforcement may cite additional violations based on
these facts or uncover additional information that could impact the
conclusion as to what violations may exist.
\10\ Supervisory Highlights, Issue 24--Summer 2021 at 35-37
available at <a href="https://www.consumerfinance.gov/data-research/research-reports/supervisory-highlights-issue-24-summer-2021/">https://www.consumerfinance.gov/data-research/research-reports/supervisory-highlights-issue-24-summer-2021/</a>.
---------------------------------------------------------------------------
Deceptive Statements About Qualifying Public Service Employment
CFPB examiners also uncovered potentially deceptive statements to
PSLF borrowers about whether their jobs qualified for PSLF. For
example, examiners have found that servicers risked committing a
deceptive practice by telling borrowers that only non-profit jobs
qualify for PSLF even though government jobs also qualify.\11\
---------------------------------------------------------------------------
\11\ Id. at 36-37.
---------------------------------------------------------------------------
Misrepresenting the Effect of Filing an Employment Certification Form
(ECF)
Borrowers previously submitted ECFs signed by their employers to
verify their periods of public service employment.\12\ CFPB examiners
found that servicers committed a deceptive act or practice by
misrepresenting the effect of filing the ECF for borrowers who had
FFELP loans, but who did not have any Direct Loans. Servicer employees
represented to FFELP borrowers that if they submitted an ECF they would
learn whether their employment qualified for PSLF. However, borrowers
would not receive a determination about employer eligibility because
the ECF would be immediately denied because of their ineligible FFELP
loans.\13\
---------------------------------------------------------------------------
\12\ Borrowers now certify their employment and apply for PSLF
on a single consolidated PSLF form.
\13\ Supervisory Highlights, Issue 24--Summer 2021 at 35-36.
---------------------------------------------------------------------------
III. The CFPB's Supervision and Enforcement Priorities
Prior supervisory observations and consumer complaints show that
servicers were not adequately complying with the law, and were making
deceptive representations about PSLF before the PSLF Waiver went into
effect.\14\ As servicers administer the new PSLF Waiver, the CFPB
expects servicers to comply with Federal consumer financial protection
laws. The CFPB plans to prioritize student loan servicing oversight
work in deploying its enforcement and supervision resources in the
coming year with a specific focus on monitoring engagement with
borrowers about PSLF and the PSLF Waiver. Where the CFPB
[[Page 11288]]
finds entities have committed UDAAPs related to PSLF and the PSLF
Waiver, the CFPB will hold them accountable.
---------------------------------------------------------------------------
\14\ See Consumer Financial Protection Bureau (CFPB), Staying on
Track While Giving Back (June 2017), available at <a href="https://www.consumerfinance.gov/data-research/research-reports/staying-track-while-giving-back-cost-student-loan-servicing-breakdowns-people-serving-their-communities/">https://www.consumerfinance.gov/data-research/research-reports/staying-track-while-giving-back-cost-student-loan-servicing-breakdowns-people-serving-their-communities/</a>.
---------------------------------------------------------------------------
In its student loan servicing oversight work, the CFPB plans to pay
particular attention to:
1. Whether servicers of any federal loan type provide complete and
accurate information about the PSLF Waiver when discussing PSLF or loan
consolidation in any communications;
2. Whether servicers have adequate policies and procedures to
recognize when borrowers are expressing interest in PSLF or the PSLF
Waiver or whose files otherwise demonstrate their eligibility and to
direct those borrowers to appropriate resources;
3. Whether servicers take steps to promote the benefits of the PSLF
waiver to borrowers who express interest or whose files otherwise
demonstrate their eligibility.
IV. Compliance Management Program Expectations
To prevent unfair, deceptive, or abusive acts or practices,
entities should consider enhancing their compliance management systems
to develop and implement policies and procedures to ensure that all
borrowers receive accurate and complete information about the PSLF
Waiver and representatives facilitate their enrollment,\15\ including
by:
---------------------------------------------------------------------------
\15\ The U.S. Department of Education has issued guidance to
FFELP and Perkins loan participants directing them to provide
interested borrowers with accurate information about the PSLF
Waiver. U.S. Dept. of Ed., Office of Fed. Student Aid, GEN-21-09,
Guidance for FFEL and Perkins Loan Program Participants on the
Limited Public Service Loan Forgiveness Waiver (Dec. 7, 2021),
available at <a href="https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2021-12-07/guidance-ffel-and-perkins-loan-program-participants-limited-public-service-loan-forgiveness-waiver">https://fsapartners.ed.gov/knowledge-center/library/dear-colleague-letters/2021-12-07/guidance-ffel-and-perkins-loan-program-participants-limited-public-service-loan-forgiveness-waiver</a>.
---------------------------------------------------------------------------
<bullet> Improving training to make sure representatives
effectively identify borrowers who may be pursuing PSLF, who have
provided information suggesting that they may benefit from the PSLF
Waiver, or who are expressing interest in PSLF or the PSLF Waiver;
<bullet> improving training to make sure representatives accurately
describe PSLF and the PSLF Waiver, their benefits, the process for
applying for PSLF, using the Waiver, and the need to act before the
October 31, 2022, deadline, including for representatives that interact
with borrowers of FFELP and Perkins loans;
<bullet> updating call scripts to prompt representatives to inform
borrowers who have provided information suggesting they may benefit
from the PSLF Waiver about the benefits of the PSLF Waiver, and the
importance of consolidating and filing a PSLF form for every job with
an eligible employer before the October 31, 2022, deadline;
<bullet> enhancing existing communication tools, such as:
[cir] Posting a dedicated PSLF Waiver information page on the
servicer's website that stresses the benefits of the waiver, explains
who is eligible for the waiver, provides the steps for using the
waiver, and emphasizes the need to apply for the waiver by October 31,
2022;
[cir] posting a temporary banner on the servicer's main web page
and account log-in web page advertising the PSLF Waiver and linking the
borrower to the dedicated PSLF Waiver information page, and
[cir] including information on the PSLF Waiver on automated hold
messages;
<bullet> tracking borrower interest in using the PSLF Waiver to
allow for targeted follow up;
<bullet> monitoring representatives' communications with borrowers
about PSLF;
<bullet> evaluating these issues through the servicer's quality
control/assurance program, compliance testing program, and audit
program at appropriate intervals;
<bullet> actively monitoring for and addressing systemic issues--
such as excessive call hold times--that inhibit PSLF borrowers from
getting information from the entity about PSLF;
<bullet> regularly reviewing consumer complaints regarding PSLF and
ensuring there is an appropriate channel for receiving, investigating,
determining root causes, and properly resolving consumer complaints
relating to misinformation about PSLF;
<bullet> ensuring that borrowers' consolidation decisions are
honored timely, including by processing consolidation applications and
providing payoff amounts timely; and
<bullet> ensuring that borrowers' PSLF forms are processed timely.
Generally, self-identification of Federal consumer financial law
violations and developing an effective corrective action plan that
includes complete identification of affected populations and complete
remediation for injured consumers are important elements of a strong
compliance management system. When these violations relate to providing
false or misleading information about PSLF, a robust and affirmative
outreach strategy to all potentially eligible consumers about the PSLF
Waiver, tailored to the borrower's loan type, may be an important
component of a corrective action plan. These actions also factor into
the CFPB's decision about whether specific violations should be handled
through supervisory or enforcement action.
CFPB Consideration of Proactive Efforts by Servicers To Promote the
PSLF Waiver
In exercising its supervisory and enforcement discretion, the CFPB
will consider the extent to which entities engage in proactive measures
to promote the benefits of the PSLF Waiver to borrowers. For example,
servicers can update call scripts to prompt representatives to
affirmatively ask borrowers if they work or have worked for a nonprofit
or government organization. In addition, servicers already use the
Defense Manpower Database Center (DMDC) or other comparable means to
identify military borrowers for purposes of ensuring that borrowers
receive the benefits of the Servicemembers Civil Relief Act; they could
engage in similar efforts with respect to the PSLF Waiver. Servicers
can also identify consumers who previously submitted Teacher Loan
Forgiveness applications and then target those groups with PSLF Waiver
communications.
The CFPB notes that time is of the essence since the PSLF Waiver
closes at the end of October 2022. After the PSLF Waiver closes, direct
payments to borrowers may be the primary means of remediating relevant
UDAAPs.
V. Conclusion
The CFPB will continue to review closely the practices of student
loan servicers for potential UDAAPs, including the practices related to
PSLF described above. The CFPB will use all appropriate tools to hold
entities accountable if they engage in UDAAPs in connection with these
practices.
VI. Regulatory Requirements
The Bulletin constitutes a general statement of policy exempt from
the notice and comment rulemaking requirements of the Administrative
Procedure Act (APA). It is intended to provide information regarding
the CFPB's general plans to exercise its supervisory and enforcement
discretion for institutions under its jurisdiction and does not impose
any legal requirements on external parties, nor does it create or
confer any substantive rights on external parties that could be
enforceable in any administrative or civil proceeding. Because no
notice of proposed rulemaking is required in issuing the Bulletin, the
Regulatory Flexibility Act also does not require an initial or final
regulatory flexibility analysis. The CFPB has also determined
[[Page 11289]]
that the issuance of the Bulletin does not impose any new or revise any
existing recordkeeping, reporting, or disclosure requirements on
covered entities or members of the public that would be collections of
information requiring approval by the Office of Management and Budget
under the Paperwork Reduction Act.
Rohit Chopra,
Director, Consumer Financial Protection Bureau.
[FR Doc. 2022-04266 Filed 2-28-22; 8:45 am]
BILLING CODE 4810-AM-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on March 1, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.