Bulletin 2022-03: Servicer Responsibilities in Public Service Loan Forgiveness Communications

CourtConsumer Financial Protection Bureau
Citation87 FR 11286
Published date01 March 2022
Record Number2022-04266
Federal Register, Volume 87 Issue 40 (Tuesday, March 1, 2022)
[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 [www.gpo.gov]
                [FR Doc No: 2022-04266]
                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
                [email protected].
                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 https://studentaid.gov/sites/default/files/fsawg/datacenter/library/pslf-sep2021.xls.
                 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
                 \3\ See Press Release, Federal Student Aid, Public Service Loan
                Forgiveness Limited Waiver Opportunity, available at https://studentaid.gov/announcements-events/pslf-limited-waiver.
                 \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 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
                (estimating these borrowers will discharge $1.74 billion in student
                loan debt).
                 Worked in a qualifying public service job but had Federal
                loans that were not Direct Loans;
                 made payments on a Direct Loan while working in a
                qualifying public service job, but not on a qualified repayment plan;
                 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;
                 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-
                 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 https://www.consumerfinance.gov/data-research/research-reports/supervisory-highlights-issue-24-summer-2021/.
                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
                 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
                 \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 https://www.consumerfinance.gov/data-research/research-reports/staying-track-while-giving-back-cost-student-loan-servicing-breakdowns-people-serving-their-communities/.
                 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
                 \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 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.
                 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;
                 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;
                 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;
                 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,
                 [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
                 tracking borrower interest in using the PSLF Waiver to
                allow for targeted follow up;
                 monitoring representatives' communications with borrowers
                about PSLF;
                 evaluating these issues through the servicer's quality
                control/assurance program, compliance testing program, and audit
                program at appropriate intervals;
                 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;
                 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;
                 ensuring that borrowers' consolidation decisions are
                honored timely, including by processing consolidation applications and
                providing payoff amounts timely; and
                 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
                 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
                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
                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

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