CFPB Investigating Possible Discrimination in Student Loan Servicing
The Consumer Financial Protection Bureau (CFPB) has identified student loan servicing as an area of risk for credit discrimination, reports The Washington Post and The Chronicle of Higher Education.
The federal watchdog agency is looking at whether loan servicing companies are making it difficult for people with past-due student debt to find a solution because of their race, ethnicity, gender or age, the Post reported.
The CFPB will evaluate discrimination in the servicing industry by comparing outcomes for all student loan borrowers who are in default on federal or private loans, reported the Post. Patrice Alexander Ficklin, director of the office of fair lending at CFPB, told reporters that the bureau has already focused in on servicers it views as high risk, but would not disclose names.
The number of defaults on student loans increased 14 percent between 2015 and 2016, the Post reported. Many people are defaulting for at least a second time. The Government Accountability Office and the CFPB have found breakdowns in servicers as they inform borrowers about affordable repayment options. In addition, the bureau has reported problems in the federal student loan rehabilitation program, as collection agencies have set incorrect monthly payment amounts and not applied payments toward the rehabilitation process.
The CFPB announcement came just days after Betsy DeVos withdrew several memos issued by the Obama administration to improve consumer protections in student loan servicing contracts. Advocacy groups say the CFPB will now be responsible for holding student loan servicing companies accountable.
The Chronicle of Higher Education
The Washington Post