Student loan servicer transfer led to 'millions of consumer credit reporting errors': Lawmakers
A "faulty" transfer of student loan accounts from NelNet to Mohela led to "millions of consumer credit reporting errors," lawmakers say in a new letter
A "faulty" transfer of student loan accounts from NelNet to Mohela in 2023 led to "millions of consumer credit reporting errors," lawmakers say in a new letter to government agencies reviewed by CNBC.
The change in loan servicers caused nearly 2 million duplicate student loan records to appear on borrowers' credit reports, while hundreds of thousands of borrowers' credit scores were reported incorrectly for up to a year and a half, according to the letter. Sen. Elizabeth Warren, D-Mass., Ron Wyden, D-Oregon, and other lawmakers sent the letter on Wednesday evening to Consumer Financial Protection Bureau Director Rohit Chopra and U.S. Department of Education Secretary Miguel Cardona.
As part of their investigation, the lawmakers sent inquiries to NelNet, Mohela and three credit reporting companies: Equifax, Experian and Transunion. They asked the companies about what had gone wrong and how many borrowers were impacted.
In their letter, the lawmakers urged the government agencies to investigate the problems.
"We respectfully request that the CFPB and ED use their supervisory and enforcement authority to ensure that the appropriate parties are held accountable for these errors," the lawmakers wrote.
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Mohela appears to have failed to inform the credit reporting companies of each loan transfer from NelNet, the lawmakers said they found in their investigation. As a result, many borrowers had their single loan balance reported twice, once by each servicer.
Duplicate student loan balances on a borrowers' credit report can reduce their credit scores and make it more difficult for them to obtain mortgages, car loans and other credit, the lawmakers note in the letter.
Mohela and Nelnet did not immediately respond to requests for comment.
The credit reporting companies identified "over 100,000 cases" in which the reporting errors led borrowers to have an incorrect credit score, according to the lawmakers' investigation. Thousands of borrowers had their credit scores drop by more than 20 points, they said.
They added that borrowers submitted around 7,500 complaints and disputes to Mohela and the credit reporting companies in attempts to fix the errors.
The credit reporting companies told the lawmakers the duplicate balances "have been resolved now," the letter said.
An Equifax spokesperson said they were aware that some student loan servicers "did not report loans in adherence to the consumer reporting guidelines."
"We are working with the Department of Education and the servicers to correct misreported accounts and ensure that student loans are being appropriately reflected on consumer credit reports," the spokesperson said.
Experian and TransUnion did not immediately respond to requests for comment.
This story originally appeared on: CNBC - Author:Annie Nova
