For the second time in a month, the Consumer Financial Protection Bureau (CFPB) has filed an enforcement action against the Pennsylvania Higher Education Assistance Agency (PHEAA), a major student loan servicer. This latest lawsuit, filed in Pennsylvania federal court, accuses PHEAA of pursuing unlawful collections on loans discharged in bankruptcy.

US CFPB Sues Student Loan Servicer For Illegal Collections : Allegations of Illegal Collections

In a complaint filed Friday, the CFPB alleges that PHEAA, also known as American Education Services, lacks proper protocols for identifying which private student loans in its servicing portfolio have been discharged. Consequently, PHEAA treats these discharged loans as if they still require repayment.

This oversight has led PHEAA to report inaccurate information to credit bureaus and attempt collections on discharged loans. Borrowers have been forced into the position of either paying debts they no longer owe or risking damage to their credit history by refusing to pay, according to the complaint.

"PHEAA has ignored its responsibilities and illegally pursued borrowers for loans they no longer owe," CFPB Director Rohit Chopra said in a statement. "The CFPB is suing PHEAA for demanding money from borrowers that they do not owe and for reporting false information to credit reporting companies."

Previous Enforcement Action

This lawsuit follows a settled enforcement action from May 6, where the CFPB filed a case against PHEAA and the National Collegiate Student Loan Trusts. This prior case involved alleged failures to properly handle borrower requests for payment relief, especially during the COVID-19 pandemic. The settlement terms, which include roughly $3 million in consumer redress and $2.15 million in fines, are still pending court approval.

US CFPB Sues Student Loan Servicer For Illegal Collections : Seeking Relief and Fines

The current lawsuit seeks fines, consumer redress, and other relief for the affected borrowers. The CFPB's legal team in this case includes Adrienne Warrell, Elizabeth A. Homan, and Emily Holness. As of Friday, PHEAA had not responded to a request for comment on the CFPB's latest suit.

Counsel information for PHEAA was not immediately available.