I have a federally subsidized loan (US), which was put into forbearance in March of this year. I didn't notice, because it is an auto pay account, but, I'm not in school and did not request any changes. The representative admitted this was their fault and would start billing again. The issue is: they charged me interest, during this time, for their mistake and recapitalized it into the loan. Making my total cost of ownership of the loan higher. Upon further inspection, they did this another time after they bought my loan, accruing interest without requesting payment, though they didn't recapitalize it.
This seems like they're extending my loan, which seems like it shouldn't be legal, I know if they do this on purpose, it's fraud, but they're still taking financial advantage of a glitch. The government subsidizes the interest, so it may also constitute federal fraud?
It seems illegal, but I can't verify that it is.
Edit: thanks for the answers, I apparently need to clarify. This isn't an issue with auto pay, I am aware of the legalities here. This is an issue of forbearance, for which the regulations are fairly obscure. Forbearance is legally defined, and only applies to returning to school or a directly requested and approved hardship, in other words, the bank isn't supposed to initiate it without cause, this is a consumer protection against a forever growing loan. But I'm not finding a specific set of law determining what is supposed to happen when the bank does this without permission, only the loan contract laying out the rules for going into forbearance. The company, Navient, is in a suit with the government for the mishandling of payments. The public description of how this is defined is vague, it could mean that each individual act itself is legal, but the trend is illegal, or it could mean that they're not following federal law on each account. The mechanics of the situation have also not been published, so I don't know what exact situations apply. But, if this were a home/car loan the bank is required by the government to perform a due diligence and the fee structures for late/delinquency must be defined in the terms. I've not been able to find a policy that covers forbearance in this way, but I do know that banks aren't allowed to profit from accounting glitches, which seems to be the closest statute to this issue.