The Consumer Financial Protection Bureau (CFPB) accused Discover Financial Service’s private student loan division of illegal debt collection practices. In New Jersey and elsewhere, the CFPB is the federal agency that helps stop harassing phone calls from creditors. The agency claimed that Discover “hounded” over 100,000 of its student loan borrowers by contacting them on their cell phones both early in the morning and late at night in violation of proscribed debt collection practices.
The company was also accused of overcharging those same customers. The CFPB also alleged that Discover did not adequately service its student loans. Most people recognize Discover as a credit card company that earns most of its revenue from that division. The company made an agreement with the CFPB to pay $18.5 million without admitting any fault.
It is estimated that one out of every five people with student loans is in default. This makes student loans second only to mortgage loans as the largest source of debt for American households. Private student loan lenders often do not offer the same repayment options as those whose loans are owned or insured by the federal government, so they are more likely to send their loans to collection. This is one reason why the federal government is taking an interest in how student loan companies interact with their borrowers.
Many New Jersey consumers would like to stop harassing phone calls from creditors, including private student loan companies. Even though student loans generally cannot be discharged in a bankruptcy, other debts can be. This could give borrowers the financial ability to stay current on their student loans.
Source: The Huffington Post, “Discover Penalized For Allegedly Cheating Student Loan Borrowers“, Shahien Nasiripour, July 22, 2015