Financial Services Superintendent Maria T. Vullo and Attorney General Letitia James today announced that the Department of Financial Services (DFS) and the New York Attorney General’s Office have entered into a joint settlement with Conduent Education Services, LLC, formerly known as Xerox Education Services, LLC, and formerly known as and doing business as ACS Education Services, Inc. (Conduent), for engaging in practices that harmed student loan borrowers. Today’s announcement is part of DFS’s ongoing efforts to protect student borrowers from harmful and illegal student loan practices.

“While the federal government neglects students, New York once again acts. Today's action demonstrates the importance of states in taking action against student loan servicers who fail to respond to the needs of student loan borrowers as required by federal and state laws,” said Superintendent Vullo.  “I am pleased that DFS acted collaboratively with the Attorney General's Office on this important settlement which provides restitution to New York borrowers who were defrauded.”

“Students rely on college to be a ladder to success, but too often prohibitive costs and disingenuous loan servicers trap students in a quick sand of debt,” said Attorney General James. “ACS has systematically failed borrowers by refusing to educate them on more effective federal repayment options, and instead, pushing them towards options that were cheap, easy, and padded their bottom line. At a time when the student debt crisis is at an all-time high, federal loan servicers should be supporting borrowers, not deceiving them at every turn. Everyone deserves a fair opportunity to work towards a life without debt."

The DFS and NYAG investigations found that Conduent violated federal and state laws while servicing federal and private student loans by:

• Steering borrowers with federal loans into forbearance instead of an income-based repayment plan (IBR);
• Steering borrowers with federal loans into IBR, or forbearance, instead of new and more favorable repayment programs known as Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE);
• Misinforming borrowers, including servicemembers, that they are ineligible for public service loan forgiveness;
• Unduly delaying borrowers from being able to consolidate their federal loans into Direct Loans;
• Failing to process IBR applications in a timely and accurate manner;
• Allocating underpayment for certain borrowers in a way that maximized late fees;
• Misinforming delinquent borrowers that they are required to pay both any delinquent amount and the present month’s payment immediately;
• Misapplying borrowers’ payments;
• Reporting incomplete and erroneous information to credit reporting agencies;
• Failing to properly recalculate monthly payments for servicemembers when adjusting their interest rates under the Servicemember Civil Relief Act;
• Charging improper late fees; and
• Failing to notify borrowers of their eligibility for a co-signer release.

The investigations further found that Conduent’s illegal, deceptive and unfair acts and practices increased the amounts that certain borrowers paid over the lifetime of their loans. 

Under the terms of the settlement, Conduent will pay a civil penalty of $1 million to the State of New York, and $8 million in restitution to impacted New York consumers.  Conduent, which has wound down its student loan servicing business, has agreed not to service student loans (except for Perkins Loans) for five years.

Today’s settlement builds upon DFS’s efforts to educate consumers and respond to complaints concerning student loans.  Governor Andrew M. Cuomo formed the Student Protection Unit (SPU) as part of the Financial Frauds and Consumer Protection Division (FFCPD) of the Department of Financial Services (DFS). The SPU was created to enhance consumer protections for New York's students, and to help those students build financially sound futures.

For more information about DFS’s Student Protection Unit, please visit https://www.dfs.ny.gov/consumer/student_protection/dfs_student_protection.htm.

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