Great Lakes falsely reported to credit bureaus – including Equifax, TransUnion, and Experian – that borrowers whose payments were automatically suspended by the CARES Act were on a “deferral” on their federal student loans. The CARES Act and the ministry’s instructions to loan companies required that these loans be reported as if a borrower was making current and on-time payments.
The company and the education department insisted that there was little or no damage to borrowers’ credit scores. But Senate Democrats said it wasn’t.
“It is difficult to know how far the consequences of this mistake will be for millions of borrowers who may try to buy a home, start a new job or take out a loan to stay financially afloat during this economic crisis. “, the senators wrote in their letter.
Besides Warren, the letter was signed by the senses. Jeff Merkley (D-Ore.), Dick Durbin (D-Ill.), Sherrod Brown (D-Ohio), Richard Blumenthal (D-Conn.) And Tina Smith (D- Minnesota.).
The VantageScore of some borrowers was lowered by the error. Jeff Richardson, spokesperson for VantageScore, one of the two major credit score providers, said the company “has treated a defer code as a negative factor in scoring in some cases,” but that the company was changing its methodology. so this would not be the case.
FICO, a competing and larger credit score provider, said it does not consider deferral when calculating its scores.
Lawmakers urged DeVos to audit all companies hired by the Education Department to ensure they correctly report borrowers’ credit information. In addition, they requested documents and information related to the error.
Education Department spokeswoman Angela Marabito said in a statement: “How is this news? There is nothing new in the letter and the problem is already being resolved.
Morabito said last week that providing incorrect information to the credit bureaus was “totally unacceptable” but that Great Lakes had “quickly corrected the coding problem” and sent corrected information to the credit bureaus.
A ministry official told POLITICO last week that the Federal Office of Student Aid, headed by Mark Brown, had yet to make a “formal decision” whether Great Lakes had violated ministry instructions on how report student loans covered by the CARES Act to credit bureaus.
Democrats said in their letter that they were not happy with Brown’s response so far. The letter accuses him of “redoubling efforts to deflect liability, blaming” third-party credit service companies “and failing to even identify the Great Lakes by name in an alert that claims to be” information for them. ” borrowers ”.”
The Senate Democrats’ letter follows similar criticism of the credit reporting error from House Democrats earlier this week. The letter, led by Rep. Susan Wild (D-Pa.), called the error “unacceptable” and said the Department of Education “should have ensured that this did not happen”.