If your student loan servicer says you missed payments you actually made, adds late fees you do not owe, or incorrectly reports your account as delinquent to the credit bureaus, you may have more than a customer service problem. You may have a legal claim.
Student loan servicer errors can have serious consequences for borrowers, particularly when mistakes result in inaccurate credit reporting. In Virginia, borrowers have specific legal protections when student loan servicers fail to properly handle their accounts—including potential remedies for borrowers who are harmed by those violations.
Common Student Loan Servicer Errors
Student loan servicers can make mistakes in a number of ways. A servicer may misapply a payment that was made on time, incorrectly claim that an account is past due, or add late fees or other charges that a borrower does not owe.
Problems can also arise when a borrower disputes an error. A servicer may continue reporting negative information to the credit bureaus while a written dispute is pending or fail to conduct a meaningful investigation after the borrower challenges the accuracy of their account history.
These types of student loan servicing errors can result in inaccurate information appearing on a consumer’s credit report. Negative credit reporting can damage a borrower’s credit score and potentially affect their ability to obtain financing, housing, or other financial opportunities.
Recent Lawsuit Highlights the Problem
A federal lawsuit recently filed by Kelly Guzzo, PLC alleges that a major student loan servicer, the Higher Education Loan Authority for the State of Missouri (MOHELA), engaged in several of these practices.
According to the allegations, the servicer misapplied payments, falsely claimed that the borrower had overdue balances, continued negative credit reporting after receiving a written dispute, and failed to adequately investigate the borrower’s challenges to the account history.
As a result of the alleged misconduct, our client experienced damage to his credit that delayed his ability to obtain favorable financing for a vehicle and caused additional financial harm.
The Real Cost of Student Loan Servicer Mistakes
Student loan servicing errors are not necessarily minor administrative mistakes. When inaccurate information is reported to the credit bureaus, the consequences can extend well beyond the loan itself.
A damaged credit history can make it more difficult or more expensive to obtain an auto loan, mortgage, credit card, or other financing. For borrowers who are already dealing with the financial pressure of student loan debt, correcting an error they did not create can add significant stress and frustration. If a student loan servicer incorrectly reports that you missed payments or were delinquent, those inaccurate reports may remain on your credit history and affect your financial opportunities long after the original servicing error occurred.
Virginia Protections for Student Loan Borrowers
Virginia borrowers have important protections when student loan servicers mishandle their accounts. Under the Virginia Student Loan Borrower Bill of Rights, qualified education loan servicers must respond to certain written borrower inquiries within specified timeframes. The law also restricts servicers from furnishing disputed payment information to a credit reporting agency for 60 days after receiving a written dispute.
Virginia law may also allow borrowers who are harmed by violations of these protections to pursue legal remedies, including actual damages and other relief.
These protections can be particularly important when a servicing error results in inaccurate information being reported to the credit bureaus.
The Fair Credit Reporting Act May Provide Additional Protection
Federal law may provide borrowers with additional protections under the Fair Credit Reporting Act (FCRA).
When a company furnishes information to a credit reporting agency and receives notice that the information is disputed, the FCRA imposes obligations regarding the investigation and accuracy of that information. If a student loan servicer fails to reasonably investigate a dispute or continues reporting information that is inaccurate or cannot be verified, that conduct may give rise to a legal claim.
For Virginia borrowers, the combination of state student loan protections and federal credit reporting laws can provide important avenues for addressing servicing errors and inaccurate credit reporting.
Do You Have a Student Loan Servicing Claim?
Don’t let a student loan servicer’s mistake quietly damage your credit.
If your student loan servicer has incorrectly marked you late, misapplied payments, added charges you do not owe, or reported inaccurate information to the credit bureaus, you may have legal options.
The experienced FCRA attorneys at Kelly Guzzo, PLC can help evaluate your situation and determine whether you may have a claim against your student loan servicer.
Our firm handles these matters on a contingency basis, meaning there are no out-of-pocket costs to you. We only recover fees if we successfully obtain compensation on your behalf.
If you believe your student loan servicer has made an error that damaged your credit or finances, contact Kelly Guzzo, PLC today for a free consultation.