News Column

Student loan firm Erudio under fire following government sell-off

May 19, 2014

Emma Lunn, theguardian.com



Graduates are reporting problems with Erudio Student Loans – a company which bought a book of old-style student loans from the government in 2013.

The issues affect people with mortgage-style student loans taken out between 1990 and 1998. Originally administered by the Student Loans Company (SLC), these loans are repaid at a fixed monthly amount over a period of between five and seven years. Interest rates are based on the retail prices index (RPI) rate of inflation. Crucially, graduates can defer repayments if they earn less than £28,775 a year. The loans are written off 25 years after graduation or when the borrower turns 50, whichever happens first.

Around 250,000 borrowers saw their loans transferred to Erudio with management of their debt starting on 1 March 2014.

Since then Erudio has been dogged by complaints covering three main issues: difficultly deferring loans; a change of policy regarding information being registered with credit reference agencies; and payments being taken by mistake.

Stories from frustrated borrowers can be found in online forums such as Twitter, Mumsnet, the Consumer Action Group and MoneySavingExpert.com, and some have contacted the Guardian to ask for help.

One of the biggest issues is that Erudio has written to around 45,000 people who defer repayments to say their details will now be given to credit reference agencies.

Previously, even though the SLC's terms and conditions said it could pass information on deferred loans to the agencies, only defaulted, not deferred, loans appeared on credit records.

The move means there is a risk someone with an outstanding student loan could have trouble obtaining credit elsewhere.

Kenny Macdonald is one graduate who fears he will be affected by this change in policy. Due to changing courses and a period of illness he graduated from St Andrews University in 2007 with larger debts than most – about £21,000. He earns less than the threshold so has been deferring repayment of his loans. However, to defer payment for another year Erudio has asked him to sign a form saying it can pass details of his deferment on to credit reference agencies.

"I have been deeply concerned about Erudio's policy regarding reporting to credit reference agencies as the amount of indebtedness on my file would probably prevent me from ever getting credit at a reasonable cost," he says.

"The primary purpose for Erudio in working with the credit reference agencies is to validate the information and evidence provided to help move deferment applications forward as quickly and efficiently as possible," an Erudio spokesperson said.

Graduates also complain that Erudio is asking people to provide much more personal information than the SLC did. For example, you now have to name your employer as well as provide your current account details and national insurance number.

Martin Lewis, founder of MoneySavingExpert.com, says the changes fly in the face of the government's promise that there would be no real change when it sold off the student loans.

"The sale of debts was meant to be a behind-the-scenes move, but we're hearing of more difficult forms, poor communication and little response," he says, "The government needs to address people's concerns as a matter of urgency."

The Guardian heard from one graduate, John*, who received a letter from Erudio informing him that previous correspondence from the SLC "may have breached the Consumer Credit Act 1974."

Concerned, John tried to contact Erudio. After emailing five times in two weeks he finally got a reply – saying the company couldn't locate his account details.

Meanwhile John only has a few weeks to complete his deferral application for this year and fears Erudio may be deliberately stalling the process. "In my case, I have had an 18-day wait for a single (incomplete) response. If this is typical, Erudio may be attempting to prejudice their customers' chances of successfully deferring their loans," he says.

Erudio said it was "committed to ensuring customers get fair and efficient processing of their student loans and deferment applications".

"Erudio is investing considerable resources and industry best practice to help customers who earn under the income threshold defer their student loans as efficiently as possible in accordance with the terms of the student loans and all applicable regulations," it said.

Meanwhile some borrowers complain Erudio has been taking payments from bank accounts when it shouldn't. Rather than payments being taken straight from a graduate's pay, as they are now, old-style loan payments were made by direct debit. Mistakes have pushed some graduates into overdraft or meant they couldn't afford to pay other expenses.

Erudio admits some payments were taken in error and blames it on an IT problem. It says it's in the process of refunding and apologising to all affected customers.

The firm is backed by a consortium including consumer debt management companies CarVal Investors and Arrow Global. Deferrals are sub-contracted to Capita.

The Department for Business, Innovation and Skills says borrowers with loans with Erudio have the same rights and obligations as they had when their loans were managed by the SLC.

"Erudio has experienced some technical issues with their systems in getting up to date deferment status information, and as a result a small number of customers may have experienced some difficulties. We have raised this issue with Erudio directly and they have assured us that they have now resolved this problem," a spokesperson said.

Borrowers with pre-1998 student loans are covered by the Financial Ombudsman Service. So if you're having trouble with Erudio, make a formal complaint and if you don't feel it has treated you fairly, contact the ombudsman.

* Not his real name


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Source: Guardian Web


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