Enforcement Action Signals Hard Line on Unfair Collection Tactics

In late 2024, the CFPB took aim at a third-party collections agency engaged in egregious practices, underscoring that unethical collectors will face harsh consequences.

The Bureau’s order against Performant Recovery, Inc. revealed the company had been deliberately delaying student loan rehabilitation processes to trigger extra fees for itself.

Under federal law, defaulted student loan borrowers can “rehabilitate” their loans with affordable payments and avoid collection costs if they start rehab within 65 days of default. But Performant’s agents were instructed to stall any borrower who called in to rehabilitate during that window – pushing them past 65 days so that hefty collection fees could be added to their balance.

This scheme, running from 2015 to 2020, saddled struggling borrowers with thousands of dollars in unnecessary charges and fattened the collector’s profits.

The CFPB deemed these tactics both unfair and abusive under consumer law, as well as a violation of the FDCPA’s ban on unconscionable collection means.

The hammer fell: Performant was ordered to stop collecting student loans entirely and pay a $700,000 penalty.

For credit union collections managers, this case is a stark reminder to scrutinize any third-party agencies they use. High-pressure or deceptive fee-harvesting practices not only harm consumers but also bring regulators cracking down – and could drag client financial institutions into reputational trouble. Ensuring all collections partners uphold the credit union’s standards of fairness is paramount.

Takeaway: The CFPB’s action against Performant highlights a zero-tolerance stance on exploitative collections. It’s a cue for every collections operation to review its tactics (and those of vendors) to ensure helping borrowers out of debt – not finding ways to pile on more.