The CFPB and the U.S. Departments of Education and the Treasury have released a Joint Statement of Principles on Student Loan Servicing, accompanied by a CFPB report. In the CFPB's press release announcing the publications, the Bureau expressed "concern" about what it calls "widespread servicing failures reported by student loan borrowers." It vowed to "stamp[] out illegal actions" and "clean up" the $1.2 trillion student loan servicing market.
These documents go much further than the usual expression of "concern" about complaints and promises of strict enforcement, though. They create a specific, interagency framework for future student loan servicing regulation. The joint statement recommendations include:
- Creating consistent, industry-wide standards for the entire servicing market;
- Holding servicers "accountable" through coordination among federal and state agencies around the enforcement of federal and state consumer financial laws, higher education laws and regulations, as well as DOE federal servicing contracts;
- Providing borrowers "access to clear, timely information" about repayment options and alternative payment plans; and
- Improving publicly available data about the performance of student loans, the utilization of specific repayment options and the outcomes of borrowers enrolled in those plans by, among other things, publicizing servicer-level data on loan performance.
The CFPB separately reported on a range of "problems" that it has identified. These include alleged issues with:
- Customer service around billing and repayment;
- Servicing transfers;
- Asserted barriers to refinancing student loans;
- Co-signer policies where the co-signer dies or goes bankrupt;
- Payment processing practices for borrowers who pay more than they owe;
- Repayment plans and other loss mitigation practices; and
- Debt relief schemes that target student loan borrowers.
The Bureau also focused on specific populations of borrowers that it views as more vulnerable, emphasizing the unique issues associated with servicemember and veteran loan servicing, as well as the interests of older consumers.
Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
© Morrison & Foerster LLP. All rights reserved