The Consumer Financial Protection Bureau proposed a rule that would allow them to federally supervise certain nonbank student loan servicers for the first time, according to a press release sent by the CFPB on March 14.
The student loan market has grown rapidly in the last decade, and servicers are now facing the stress of an increasing number of delinquent borrowers, CFPB Director Richard Cordray said. Our rule would bring new oversight to the student loan market and help ensure that tens of millions of borrowers are not treated unfairly by their servicers.
According to Federal Student Aid, an office of the U.S. Department of Education, a student loan servicer is the company that handles the billing and other services on student loans. Students do not pick their loan servicers; they are assigned by the Department of Education after the student receives the loan.
Director Cordray and the CFPB team have always been great partners with us, and we have worked together on a number of projects to protect consumers and better support students, Secretary of Education Arne Duncan said. We look forward to working with them on their efforts to ensure that loan servicers are protecting student loan borrowers.
CFPBs proposed rule would allow them to supervise any nonbank student loan servicer that handles more than one million borrower accounts, according to the press release.
The CFPB is proposing five protections. The first one states that the CFPB supervision activities would generally include examining the nonbank student loan servicers. The examination process would be an ongoing process of pre-examination scoping and review of information, data analysis, on-site examinations, and regular communication with these companies.
Another protection would be to make sure all relevant federal consumer financial laws are being followed by student loan servicers.
This proposed rule would also make sure that nonbank student loan servicers are being held to the same standard as bank student loan servicers.
According to the press release this rule will cover both federal and private student loans.
With this rule the CFPB would also be able to supervise the entire life of the loan from origination through servicing to debt collection.
The public will have 60 days to comment on the proposed rule after it is published in the federal register.