Examiners at the CFPB found that some student loan servicers are treating borrowers unfairly and engaging in “illegal practices,” according to a new report released Tuesday.

The bureau's latest supervisory highlights report revealed that one or more servicers divided payments to maximize the late fees charged to the borrower. The report included supervisory activities from March 2014 through June 2014.

“Where the borrower made a payment that was less than the total amount due, CFPB examiners found that one or more servicers allocated the amount proportionally to each loan,” the report read. “That resulted in borrowers getting charged a minimum late fee on all of their loans and all of their loans becoming delinquent. Supervision cited these fee-maximizing practices as unfair under the Dodd-Frank Act.”

The report also said one or more servicers overstated the minimum payment due on periodic statements and online account statements sent to borrowers by including amounts in deferment. In some cases, servicers also failed to provide borrowers with accurate tax information.

“This practice may have caused some consumers to lose up to $2,500 in tax deductions. Examiners found this failure to provide accurate information to be unfair and deceptive under the Dodd-Frank Act,” the CFPB said.

According to the report, examiners also discovered that some servicers were making illegal debt collection calls.

“Students are already struggling with crushing amounts of loan debt. Student borrowers deserve better than illegal practices as they work to pay back their loans,” CFPB Director Richard Cordray said. “All borrowers should be treated fairly by loan servicers, and through our supervision program, we intend to hold them accountable for how they treat borrowers.”

The CFPB's findings regarding mortgage servicers were also included in the report. Examiners found that one or more mortgage servicers had delayed permanent loan modifications.

“Once the borrower has successfully completed the trial modification, the servicer should then covert it into a permanent loan modification. Where there were delays in this conversion, examiners found that consumers were harmed because they did not promptly receive the benefits of the terms of the permanent modification,” the CFPB said.

According to the report, some mortgage servicers were not executing borrowers' signed loan modification agreements either.

“Instead, after a significant period of time, the servicers sent borrowers updated agreements with materially different terms,” the CFPB report read. “These misrepresentations about the available terms affected the borrowers' payments, whether they would accept the modification, and how they could budget based on their expected payment.”

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CFPB Probe Reveals Illegal Student Loan Practices

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