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September 29, 2015

CFPB raises concerns about student loan servicing issues

CFPB published a report Tuesday outlining servicing failures reported by federal and private student loan borrowers – the results of a joint public inquiry the bureau began in May with the Education Department and the Treasury Department.

CFPB Director Richard Cordray noted that one in four student loan borrowers struggle to repay their loans or are already in default. "Today's report underscores the need for market-wide student loan servicing reforms to halt harmful practices and boost assistance for distressed borrowers," he said.

NAFCU Regulatory Affairs Counsel Kavitha Subramanian said NAFCU and its members "firmly believe that students should have access to transparent information about a variety of safe and vital financial services, specifically student loans to pay for their education."

She continued, "While NAFCU appreciates the CFPB's attention to the unregulated actors in this space, we are concerned the proposed framework takes a one-size-fits-all approach and would not provide adequate flexibility for well-regulated credit unions to serve this important student demographic."

CFPB joined with the Education Department and Treasury Department to recommend four principles to improve student loan servicing practices, including:

  • consistent standards for the student loan servicing market;
  • strengthened servicer communications to give borrowers better information;
  • an emphasis on accountability; and
  • more oversight by federal and state regulators, with public access to data on student loan performance.

NAFCU staff will continue to review the report and analyze it for its potential effect on credit unions.

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