On September 29, the CFPB released a report on student loan servicing. The report is the result of the Bureau's May 2015 public inquiry into student loan servicing. Noting the breadth of and continuing distress of the student loan industry, the CFPB stated in its press release that the Bureau intends "to explore potential industry-wide rules to increase borrower protections."
Key consumer complaints highlighted by the CFPB include:
- Difficulties with account information access and error resolution.
- Inaccuracies due to servicer transfers, including mistakes in payment posting, allocation, and processing, as well as the administration of certain borrower benefits.
- Delays and inaccuracies that impede loan refinancing.
- Co-signer policies that put accounts in default without notice to the borrower.
- Confusion regarding servicers' payment processing and allocation practices.
In addition to noting areas of concern regarding student loan servicing, the CFPB's report discusses specific risks for older Americans, military borrowers, and consumers with disabilities. The CFPB indicated that members of these groups could face unique issues with regard to student loan servicing, and often did not receive assistance or protections for which they may have qualified.
In conjunction with its report, the CFPB, the Department of Treasury, and the Department of Education issued a Joint Statement of Principles on Student Loan Servicing, highlighting key areas for industry improvement. The principles include:
- Consistent, industry-wide standards: The CFPB states that the student loan servicing market lacks consistent standards that cover the servicing of all private and federal student loans.
- Servicer Accountability: The CFPB's framework calls for continued coordination among federal and state agencies regarding the enforcement of federal and state consumer financial laws, higher education laws and regulations, and federal servicing contracts made by the U.S. Department of Education.
- Clear, timely information: The framework calls for information provided by servicers to be accurate and actionable, ensuring borrowers are empowered to make choices that encourage borrower success and mitigate defaults.
- Publicly available data: The framework calls for greater transparency, including periodic publication of servicer-level data on loan performance.
The Joint Framework, as well as the issues highlighted by the CFPB in its report, likely may form the basis of rule proposals regarding the student loan servicing industry. Director Cordray stated in the CFPB's press release that the report "underscores the need for market-wide student loan servicing reforms to halt harmful practices and boost assistance for distressed borrowers."