A Federal District Court Judge ruled in a class action case called Savedoff that a student loan lender broke its own rules in the manner in which it handled payments made by borrowers. Borrowers were under the assumption that if they paid according to the contract, a certain amount would be credited towards their principal balance. Instead, it was revealed that the lender was allocating payments towards accrued interest, and not allocating according to the contract. Even though the lender later attempted to voluntarily correct the accounting manuever, the Court found that the lender still had not done right by the borrowers.
The Court’s decision will be a matter of public record, and hopefully the decision will prompt other lenders to conduct internal investigations to determine if they have mishandled allocations of payments. Class action cases have their critics, but this is another example of how many injured consumers were provided legal representation without astronomical legal costs.
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