CFPB Action Against Performant Recovery: What Borrowers Need to Know
Understanding the CFPB’s enforcement action against Performant Recovery and what it means for student loan borrowers in default.
The Consumer Financial Protection Bureau (CFPB) issued an enforcement order against Performant Recovery, Inc., a student loan debt collection company, for using unlawful tactics that caused borrowers in default to pay avoidable collection costs. This article explains what the CFPB found, why it matters, and how borrowers can respond if they have dealt with similar conduct.
Background: Who Is Performant Recovery and What Did the CFPB Find?
Performant Recovery is a third-party debt collection company that has contracted to collect on various debts, including federal student loans in default. According to the CFPB’s findings, the company engaged in a multi-year scheme involving defaulted federal student loan borrowers who were attempting to rehabilitate their loans, a process that allows borrowers to return defaulted loans to good standing under federal law.
The CFPB found that, rather than helping certain borrowers complete rehabilitation efficiently, Performant allegedly manipulated the timing of the process to increase the likelihood that borrowers would be charged additional collection costs, while Performant earned higher fees.
Key Elements of the Scheme Identified by the CFPB
- Target: Borrowers in recent default – The conduct focused on borrowers who had defaulted on federal student loans and contacted Performant within a specific timeframe after default.
- Incentive: Fee structure – Under program rules, if borrowers entered rehabilitation quickly (within a defined number of days from default), they typically avoided collection costs and collection agencies received no fee for those accounts.
- Strategy: Delayed rehabilitation – CFPB found that Performant used its control over the process to delay borrowers’ entry into rehabilitation until after that favorable period expired, triggering collection costs and enabling the company to collect fees.
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How Federal Student Loan Rehabilitation Normally Works
Under the federal student loan system, borrowers who default may have an opportunity to remove the default through loan rehabilitation. The U.S. Department of Education describes rehabilitation as a process involving a series of agreed-upon payments that, once completed, returns the loan to current status and can remove the default from the borrower’s credit history.
| Feature | Normal Rehabilitation Process | Issue in the Performant Case |
|---|---|---|
| Borrower in default | Contacts a servicer or collector to set up a rehabilitation agreement. | Borrowers calling soon after default were routed differently. |
| Timeline to enter rehab | Entering rehab within a certain number of days can avoid collection costs and agency fees. | Performant allegedly delayed actions so this period would expire. |
| Communication methods | Collectors may use phone, email, fax, or mail to complete forms promptly. | Performant allegedly insisted on slower methods like postal mail for certain borrowers. |
| Impact on costs | Quick entry into rehab can minimize or avoid collection charges for borrowers. | Delays increased collection costs, which were then added to borrowers’ loans. |
Specific Practices the CFPB Deemed Unlawful
The CFPB concluded that Performant’s conduct violated both the Consumer Financial Protection Act of 2010 (CFPA) and the Fair Debt Collection Practices Act (FDCPA). Federal law prohibits debt collectors from using unfair, abusive, or unconscionable means to collect debts.
Deliberate Delays for Certain Borrowers
- When borrowers called to rehabilitate their loans within a set number of days after default, Performant routed them to specialized agents.
- According to the CFPB, managers instructed these agents that their objective was to delay rehabilitation “as much as possible” without openly violating rules.
- Instead of processing rehabilitation agreements over the phone, agents told these borrowers that they had to receive and return blank forms sent by postal mail, even though faster options were available.
Result: Higher Costs for Borrowers, Higher Fees for Performant
- By delaying entry into rehabilitation until after the favorable window closed, borrowers incurred substantial collection costs that were added to their loan balances.
- Once collection costs applied, the program paid Performant fees on these accounts, creating a conflict between borrowers’ interests and the company’s financial incentives.
- Some borrowers ended up paying thousands of dollars more than they would have if their rehabilitations had been processed promptly.
Legal Violations Identified
According to the CFPB’s order, the conduct amounted to:
- Unfair and abusive acts or practices under the Consumer Financial Protection Act of 2010 (CFPA).
- Unfair and unconscionable means of collecting debts under the Fair Debt Collection Practices Act (FDCPA).
Unfair or abusive acts under federal consumer law generally include practices that cause substantial harm to consumers that they cannot reasonably avoid, and that do not provide countervailing benefits to consumers or competition.
Consequences for Performant Recovery
As a result of the enforcement action, the CFPB imposed significant restrictions and penalties on Performant. The order requires the company to take the following actions:
- Exit student loan servicing and collections – Performant must stop servicing and collecting on all student loan debts.
- Pay a civil money penalty – The company is required to pay a $700,000 civil money penalty to the CFPB’s Civil Penalty Fund, which can be used to provide redress to harmed consumers in eligible cases.
- Cease the unlawful practices – Performant must not engage in similar delay tactics or other unfair or abusive practices in future debt collection activities.
Why This Case Matters for Student Loan Borrowers
The Performant case illustrates how complex program rules can create incentives for collectors to prioritize fees over borrowers’ rights and cost protections. Federal law is designed to limit abusive or harassing debt collection behavior and to ensure that borrowers are treated honestly and fairly.
Broader Context: Debt Collection Abuses and the FDCPA
Debt collectors, including student loan collectors, are subject to the FDCPA, which prohibits practices such as harassment, threats, false representations, and other unfair means of collection. In other cases involving Performant, consumers have alleged conduct such as excessive calls, contacting consumers at work after being asked not to, and providing misleading information.
While each case turns on its specific facts, the CFPB’s action underscores that federal regulators are willing to challenge collection practices that exploit technical rules or limited borrower understanding of complex programs.
What Borrowers Can Do If They Were Affected
If you rehabilitated (or attempted to rehabilitate) federal student loans through Performant and believe you may have been harmed by delays or added collection costs, there are several practical steps to consider.
1. Review Your Loan History and Documentation
- Obtain a copy of your current loan records, including payment history and collection cost assessments, from your current servicer or through the federal student aid system.
- Compare the date you entered default with the date your rehabilitation agreement was processed.
- Gather any letters, emails, or notes about calls with Performant, including dates, instructions regarding forms, and any delays you experienced.
2. Consider Submitting a Complaint
- You can submit a complaint to the CFPB about issues with student loan debt collection or servicing; the CFPB forwards complaints to the relevant company and tracks responses.
- You may also be able to complain to your state attorney general or state consumer protection agency, as many states have additional protections for debt collection practices.
3. Understand Your Rights Under Federal Law
The FDCPA gives consumers important rights in dealing with third-party debt collectors, including the right to:
- Receive written notice of the debt, including the amount and the name of the creditor.
- Dispute the debt in writing and request verification.
- Be free from harassment, threats, or repeated calls intended to annoy or abuse.
- Limit certain contacts, such as calls to the workplace, after you notify the collector that such calls are not allowed.
For federal student loans, borrowers may also have rights to income-driven repayment plans, additional options for getting out of default, and protections in cases of servicer or collector misconduct, as described by federal agencies.
Practical Tips to Protect Yourself When Dealing With Debt Collectors
While not specific to Performant, the following steps can help any consumer protect their interests when dealing with collection agencies:
- Keep written records – Document all communications, including dates, names of representatives, and what was said.
- Request information in writing – Ask for written confirmation of any payment plan, rehabilitation agreement, or settlement terms.
- Verify the debt – If you are unsure about a debt, request formal verification rather than agreeing to pay immediately.
- Be cautious about deadlines – For programs with specific timing rules (such as rehabilitation cost waivers), ask direct questions about any deadlines and how they affect fees and collection costs.
- Seek reputable advice – Consider contacting a nonprofit credit counselor, legal aid office, or consumer law attorney if you believe a collector has acted improperly.
Frequently Asked Questions (FAQs)
Q1: What did the CFPB say Performant Recovery did wrong?
The CFPB found that Performant deliberately delayed certain borrowers’ entry into federal student loan rehabilitation so that those borrowers would incur collection costs, which in turn generated fees for Performant. This conduct was deemed unfair, abusive, and unconscionable under federal consumer protection and debt collection laws.
Q2: Does the CFPB order cancel my student loan debt?
No. The enforcement order requires Performant to stop servicing and collecting student loans and to pay a civil money penalty, but it does not automatically cancel individual borrowers’ student loan obligations. Borrowers remain responsible for their loans unless they obtain relief through separate legal or administrative processes.
Q3: How do I know if Performant handled my student loan?
You can review past billing statements, collection letters, or emails for references to Performant Recovery, Inc. You can also request your account history from your current servicer and check whether Performant appears in prior servicing or collection records.
Q4: What should I do if I think I paid unnecessary collection costs?
If you believe delays or misleading information caused you to pay costs you should not have owed, gather your records and consider submitting a detailed complaint to the CFPB. You may also wish to seek legal advice, particularly from an attorney familiar with student loan and FDCPA issues, to explore possible remedies.
Q5: Are other debt collectors subject to the same rules?
Yes. Most third-party debt collectors are covered by the FDCPA, and companies that collect or service consumer financial products are subject to the CFPA and other federal and state laws.These laws generally prohibit unfair, deceptive, abusive, or harassing practices in connection with the collection of consumer debts.
References
- Performant Recovery, Inc. — Consumer Financial Protection Bureau Enforcement Action. 2024-12-09. https://www.consumerfinance.gov/enforcement/actions/performant-recovery-inc/
- CFPB Takes Action Against Student Loan Debt Collector Performant Recovery for Illegal Fee-Generating Scheme That Cost Borrowers Thousands of Dollars — Consumer Financial Protection Bureau Newsroom. 2024-12-09. https://www.consumerfinance.gov/about-us/newsroom/cfpb-takes-action-against-student-loan-debt-collector-performant-recovery-for-illegal-fee-generating-scheme-that-cost-borrowers-thousands-of-dollars/
- Was Performant Recovery Inc. Sued for Allegedly Committing Unlawful Debt Collection in Violation of the FDCPA? — Rights Protection Law Group, PLLC. 2021-07-01. https://rightsprotect.com/blog/2021/07/was-performant-recovery-inc-sued-for-allegedly-committing-unlawful-debt-collection-in-violation-of-the-fdcpa/
- Stop Performant Recovery Debt Collection Harassment — Consumer Law Firm Center. 2023-05-10. https://consumerlawfirmcenter.com/performant-recovery-debt-collection-harassment-stop-the-calls/
- Sued By Performant Recovery, Inc? We Can Help — Attorney Debt Fighters. 2023-02-14. https://attorneydebtfighters.com/sued-by-performant-recovery-inc/
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