The nation's most powerful financial watchdog agency directed student loan servicers that unlawfully collected debt discharged in bankruptcy to return those funds to affected borrowers, YahooFinance.com reported. It also warned all servicers against the illegal practice and to cease those efforts immediately. The bulletin issued yesterday by the Consumer Financial Protection Bureau (CFPB) comes after the agency’s examiners found some private student loan servicers did not determine whether loans were discharged and continued to bill and collect payments, running afoul of the Consumer Financial Protection Act’s “prohibition on unfair, deceptive, or abusive acts or practices.” Many borrowers continued to pay thousands of dollars on those loans, it said. “When a court orders the discharge of a loan, lenders and servicers should not treat this as a suggestion,” CFPB Director Rohit Chopra said in a press release. “The CFPB has found that some servicers are ignoring bankruptcy court orders. The student loan servicing industry should ensure that their collection practices are compliant with the law.”
