U.S. Senator Menendez calls on CFPB to investigate PSLF customer service issues; issue guidance to protect consumers from Zelle-related fraud
The Senator also pressed the director on how bank overdraft fees disadvantage underserved communities
WASHINGTON, D.C. – U.S. Senator Bob Menendez (D-N.J.), a senior member of the Senate Committee on Banking, Housing and Urban Affairs, in Thursday’s hearing urged Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra to investigate customer service issues with MOHELA, the sole servicer for student loan borrowers pursuing Public Service Loan Forgiveness (PSLF).
The Senator also pressed Director Chopra on the agency’s progress towards issuing agency guidance to ensure consumers are protected from Zelle-related fraud.
“I continue to hear from my constituents about customer service issues with MOHELA … Complaints range from telephone wait times of up to four hours, six month or longer processing delays for PSLF applications and Employee Certification Forms, and the issuing of conflicting, misleading, and inaccurate information about the right to receive refunds for payments made during the COVID-19 payment pause,” Menendez said. “I cannot overstate the negative economic impacts caused by MOHELA’s abysmal servicing for public service employees.”
As of July 1st, MOHELA is the only servicer for borrowers pursuing PSLF that manages loans for at least 9 million borrowers nationwide, including an estimated 272,000 in New Jersey.
Sen. Menendez pressed Director Chopra for an update on CFPB’s progress towards issuing agency guidance to ensure consumers are protected from Zelle-related fraud and require the banks to provide relief to those affected by these fraudulent schemes as he continues to hear from constituents who have fallen victim to fraud and scams on the instant payment application.
Sen. Menendez also asked Director Chopra about banks’ use of overdraft fees, which disproportionately affect low-and moderate-income households.
“A 2021 report by the Financial Health Network found that nearly 60 percent of all overdraft fees in 2020 were paid by low- and moderate-income households and about 25 percent were paid by Latino households specifically,” Menendez said. “According to the CFPB, the banks make $15 billion a year in overdraft and nonsufficient funds. To put that into context, the banks all together made $71.7 billion in the third quarter of 2022 … It seems to me that these institutions would be successful in terms of their financial wherewithal without these fees, and they particularly affect the most significant in our society who are already at a disadvantage.”
Sen. Menendez is the author of the Second Chance At Public Service Loan Forgiveness Act, bicameral legislation that would fix long-standing problems with the PSLF program and enable millions of previously ineligible public servants, such as teachers, firefighters, nurses, and social workers to have their student loans forgiven.
Sen. Menendez has been a champion leader in the fight to hold the financial industry accountable and protect consumers. This past September, during a Senate Banking hearing with CEOs of some of the largest banks in the country, he called for these financial institutions to eliminate overdraft fees that disadvantage working families. This year, he has led several efforts to protect consumers from Zelle-related fraud and scams, and throughout the years has also led the charge in the Senate for consumer protections – including from banks, data breach protections for consumers, cyber security, and more.
