US CFPB sues student loan servicer for illegal collections

-The U.S. Consumer Financial Protection Bureau sued the Pennsylvania Higher Education Assistance Agency, accusing the student loan servicer of illegally collecting on loans that have been discharged in bankruptcy, and sending false information about borrowers to credit reporting companies.

The CFPB said that from 2017 to 2021, PHEAA collected or tried to collect on 7,934 of the loans following bankruptcy proceedings, including at least 177 eligible for discharge. "PHEAA has ignored its responsibilities and illegally pursued borrowers for loans they no longer owe," CFPB Director Rohit Chopra said in a statement.

Friday's lawsuit in the federal court in Harrisburg seeks restitution for borrowers, a civil fine and an injunction against further violations.On May 6, PHEAA agreed to pay restitution and a $1.75 million fine to resolve claims it ignored thousands of borrowers' requests for loan relief over several years, including early in the COVID-19 pandemic.

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