On December 3, 2013, the Consumer Financial Protection Bureau (“CFPB”) announced it will issue a new rule that will allow the CFPB to supervise nonbank student loan servicers. Additionally, the CFPB updated its Supervisory and Examination Manual to provide guidance on the CFPB’s monitoring of bank and nonbank servicers of private and federal student loans.
Student lending is the second largest source of consumer debt in the United States. Although the federal government is involved in a significant portion of student lending, private student loans comprise a significant portion of many banks’ loan portfolios. Numerous servicers manage repayment of private and federal student loans. The CFPB’s press release identifies a number of common complaints associated with student loans, including problems with prepayment, issues with partial payment when the payment exceeds the borrower’s ability to repay, and unannounced transfers in loan servicing.
The CFPB also issued a sample letter that consumers can send to student loan servicers with respect to extra payments. The letter directs servicers to apply extra money to the highest interest rate loan, which was apparently guided by borrower complaints.
Student loan servicers and issuers need to pay attention as the CFPB begins increased regulation of this area of lending. Please follow this blog for updates, and consult Spilman or other knowledgeable counsel with any questions you may have.