Tuesday, December 3, 2013
CFPB Issues Rule to Supervise Largest Nonbank Student Loan Servicers
Consumers Union Urges CFPB To Take Action Against Unfair
Loan Servicing Abuses and To Adopt Other Reforms
WASHINGTON, D.C. – The Consumer Financial Protection Bureau (CFPB) adopted a final rule today defining the nonbank student loan servicers it will now supervise. The CFPB should use this new authority to ensure borrowers are being treated fairly and to rein in abusive loan servicing practices, according to Consumers Union, the policy and advocacy division of Consumer Reports.
“Millions of student loan borrowers are drowning in debt and struggling to keep up with their monthly payments,” said Suzanne Martindale, staff attorney for Consumers Union. “The CFPB should make sure loan servicers are treating borrowers fairly and helping them take advantage of the most affordable options available for paying off their debts.”
The CFPB has collected thousands of complaints from borrowers about problems they have encountered with loan servicers, including poor customer service, difficulty making prepayments or partial payments on loans, and lost paperwork or processing errors when loans are transferred between servicers. Consumers Union chronicled many of these same complaints and others from borrowers in its report Degrees of Debt, which highlighted their stories and outlined needed reforms.
Under the final rule, the CFPB will supervise nonbank student loan servicers that handle at least one million borrower accounts, which will cover the seven largest student loan servicers who collectively handle tens of millions of private and federal loan accounts.
Consumers Union called on the CFPB to use its authority to prohibit deceptive and abusive collection and servicing practices. In addition, Congress and the CFPB should require student loan servicers to establish clear procedures and a single point of contact for questions and complaints. Complaint handling, resolution and appeals should be centralized and monitored by regulators.
“Borrowers who are doing their best to pay off their loans shouldn’t have to put up with the runaround and lousy customer service from loan servicers,” said Pamela Banks, senior policy counsel for Consumers Union. “Today’s rule will help ensure that loan servicers are held accountable for treating borrowers fairly and helping them manage their debts responsibly.”
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