Chair Elizabeth Warren, D-Mass., conducts the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth hearing titled Promoting Competition, Growth, and Privacy Protection in the Technology Sector, in Dirksen Building on Tuesday, December 7, 2021.
- 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, and hundreds of thousands of borrowers' credit scores being reported incorrectly for up to a year and a half, according to the letter, which Sen. Elizabeth Warren, D-Mass., Ron Wyden, D-Oregon, and other lawmakers sent on Wednesday evening.
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.
Get Tri-state area news delivered to your inbox.> Sign up for NBC New York's News Headlines newsletter.
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.
More from Personal Finance:
Why new retirees may need to rethink the 4% rule
There's 'urgency to act' to get best returns on cash, expert says
Slash your 2024 tax bill with these last-minute moves
Money Report
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.
Nelnet spokesperson Ben Kiser said the issues "arose out of an ED-directed change in servicing requirements," which "are entirely outside servicers' control."
Mohela did not immediately respond to a request 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.
A spokesperson for the Consumer Data Industry Association responded on TransUnion's behalf to CNBC's request for comment.
"Our CDIA members were aware some consumers faced issues and actively worked with the student loan servicers to address the matter," the spokesperson said. "The bureaus continue to work with servicers to ensure that student loan and other accommodations are being appropriately reflected on consumer credit reports."
Experian did not immediately respond to a request for comment.
