Photographer: Chris Goodney/Bloomberg

Xerox Overcharged Student Debtors, State Prosecutor Says

The company known more for its photocopiers is the latest to allegedly run afoul of student loan rules.

Xerox Corp. has agreed to pay $2.4 million to settle Massachusetts state prosecutors’ accusations that the company mistreated student debtors in violation of state law banning unfair and deceptive practices, Attorney General Maura Healey said.

Xerox, known more for its photocopiers than for its student loan business, allegedly took months to process debtors’ applications to make reduced payments under a federal program, charged excessive fees, harassed borrowers with numerous phone calls, and overcharged active-duty service members in violation of federal law, according to a copy of the settlement filed on Monday in Massachusetts state court. Xerox denied liability.

The company “regularly undermined the opportunity for students to access appropriate repayment plans,” Healey said in a statement. “This conduct increases the already high cost of education, damages credit, and prevents students and their families from achieving long-term economic security.”

Kevin Lightfoot, a Xerox spokesman, said the company cooperated with Healey’s office and worked closely with prosecutors to improve its loan-servicing practices.

The agreement is the latest in a growing list of settlements struck between government agencies and student loan companies accused of misconduct, part of a government crackdown following years of widespread consumer complaints of shoddy customer service. Since 2014, federal regulators have settled similar allegations lodged against companies such as Navient Corp., formerly known as Sallie Mae; Wells Fargo; and Discover Financial Services.

The Massachusetts agreement is probably the first in what is expected to be a much broader settlement between the company and numerous state and federal regulators over its student loan practices. In January the federal Consumer Financial Protection Bureau told Xerox that its enforcement staff had amassed enough evidence in a two-year investigation to indicate the company violated federal laws banning unfair practices, according to Xerox’s securities filings. CFPB officials are considering whether to sue the company in court.

Xerox got into the student loan business with its 2010 purchase of Affiliated Computer Services. In January, Xerox decided to split itself into two companies, forming Conduent Inc., which took over the student loan unit and other divisions that specialize in business services.

The company has a troubled history of handling student loans. Over the past two years, Xerox has told investors several times that it’s discovered errors in its servicing of student loans, ranging from a backlog of unprocessed applications to faulty reporting to credit reporting agencies. It lost a lucrative U.S. Department of Education contract, allegedly kept defective records, and a 2015 study by a community college group found that Xerox borrowers were at greater risk of default than if they had dropped out of school or failed to complete even a single college course.

As part of the Massachusetts settlement, some 800 borrowers will split about $400,000 to compensate them for Xerox’s failure to process their applications to make lower monthly payments, Healey’s office said. State prosecutors hope to send a portion of the remaining $2 million to borrowers struggling with their student loan bills.

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