Federal Consumer Protection Bureau to Examine Private Student Loan Providers

Federal Consumer Protection Bureau to Examine Private Student Loan Providers

December 18, 2012

On Monday, the Consumer Financial Protection Bureau (CFPB) issued a set of procedures that the agency will use to examine whether private student loan providers are in compliance with federal banking regulations.

The Student Lending Examination Procedures provides guidance to CFPB agents conducting compliance audits of certain financial institutions that issue educational loans. Under the procedures, regulators will evaluate each lender to ensure that they are providing borrowers with accurate account information, making appropriate disclosures, handling borrower inquiries and complaints, and using accurate, non-discriminatory advertising or marketing. The guidance mentions servicing issues for borrowers trying to enroll in federal programs that allow borrowers to make income-based repayments, as well as laws governing lending to active-duty members of the military.

"For many borrowers, a student loan may be their first major financial decision," said CFPB Director Richard Cordray. "With student debt topping a trillion dollars, we will be working to ensure consumers are treated fairly and lenders are held accountable."

CFPB and other consumer advocates previously urged Congress to put in place more protections for borrowers in the private student loan market, such as providing more-transparent disclosure statements and making it easier for borrowers to discharge loans in bankruptcy, reported the Chronicle of Higher Education. In July, the bureau issued a sweeping report on private student loans that concluded that a boom in private student loans from 2001 to 2008 was fueled by lax lending standards and predatory marketing practices. It recommended that Congress investigate restoring bankruptcy privileges for those loans. Additionally, the CFPB's student loan ombudsman issued his own report in October on issues facing student borrowers.

 

Related Links:

Consumer Financial Protection Bureau (CFPB) Press Release

http://www.consumerfinance.gov/pressreleases/consumer-financial-protection-bureau-releases-exam-procedures-for-student-loans/

The Chronicle of Higher Education

http://chronicle.com/article/US-Issues-Guidance-for/136349/?cid=at&utm_source=at&utm_medium=en

Michelle Cormier Mott

Government Relations