In a recent letter to government organizations examined by CNBC, lawmakers claim that millions of consumer credit reporting mistakes resulted from a flawed transfer of student loan accounts from Nelnet to Mohelain in 2023.
According to the letter, hundreds of thousands of borrowers’ credit scores were reported inaccurately for up to a year and a half, and over 2 million duplicate student loan records appeared on customers’ credit reports as a result of the loan servicer modification. The letter was written Wednesday evening to U.S. Department of Education Secretary Miguel Cardona and Consumer Financial Protection Bureau Director Rohit Chopra by Senator Elizabeth Warren, D-Mass., Ron Wyden, D-Oregon, and other senators.
The lawmakers contacted Nelnet, Mohela, and three credit reporting agencies—Equifax, Experian, and Transunion—as part of their probe. They questioned the businesses about the issues and the number of borrowers affected.
The MPs requested government agencies to look into the issues in their letter.
The lawmakers wrote, “We humbly ask that the CFPB and ED exercise their enforcement and supervisory powers to make sure that the right people are held responsible for these mistakes.”
According to the MPs’ research, Mohela seems to have neglected to notify the credit reporting agencies of every loan transfer from Nelnet. As a result, many borrowers received two reports for their single loan balance, one from each servicer.
The congressmen point out in the letter that having duplicate student loan amounts on a borrower’s credit report can lower their credit ratings and make it more difficult for them to get auto loans, mortgages, and other credit.
Ben Kiser, a Nelnet official, stated that the problems resulted from a change in servicing requirements that was ordered by the ED and was completely uncontrollable by servicers.
A request for comment from Mohela was not immediately answered.
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. They claimed that thousands of borrowers experienced a more than 20-point decline in their credit scores.
They also mentioned that in an effort to correct the mistakes, borrowers filed almost 7,500 complaints and disputes with Mohela and the credit reporting agencies.
According to the letter, the credit reporting bureaus informed the lawmakers that the duplicate balances had been settled.
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.
CNBC’s request for response was answered by a representative of the Consumer Data Industry Association on behalf of TransUnion.
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.
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