Today the Consumer Financial Protection Bureau (CFPB) announced they will begin supervising nonbank student loan servicers for the first time.
While the new rule does not alter or modify any repayment plans consumers are thirsty for in order to manage their private student loans, supervision is a step in a positive direction.
The new rule and supervision is really aimed at accurate payments and take positive steps to get that part of the machine working a bit better.
The CFPB’s rule subjects any nonbank student loan servicer that handles more than one million borrower accounts to CFPB supervisory authority. The Bureau estimates that it will now have authority to supervise the seven largest student loan servicers. Combined, those seven are responsible for more than 70 percent of the activity in the nonbank student loan servicing market.
“Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules,” said CFPB Director Richard Cordray. “This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers.”
If you’d like to learn more about what the rule covers, your can unlock the content below for free.[sociallocker id=”61867″] Nonbank student loan servicers, regardless of size, continue to be subject to the Bureau’s enforcement jurisdiction. Servicers who are not considered “larger participants” may still be subject to the Bureau’s supervisory authority if the Bureau has reasonable cause to determine the servicer poses risk to consumers.
CFPB supervision activities will generally include gathering reports from and conducting examinations of supervised entities. The examination process includes a review of information, data analysis, on-site examinations, and regular communication with supervised entities, as well as follow-up monitoring. When necessary, examiners will coordinate and work closely with the CFPB’s enforcement staff to take appropriate enforcement actions to address harm to consumers.
Examiners will make sure all relevant federal consumer financial laws are being followed by student loan servicers. These laws may include the Fair Credit Reporting Act, Electronic Fund Transfer Act, Equal Credit Opportunity Act, and prohibitions on unfair, deceptive or abusive acts or practices. These laws not only protect consumers but responsible servicers as well by ensuring that all companies are playing by the rules.
The Bureau will ensure that banks and nonbanks are following the same rules in the student loan servicing market. Before this rule, CFPB examiners supervised large bank student loan servicers to ensure that they were complying with federal consumer financial laws, while nonbank student loan servicers were not similarly being examined. This rule makes sure that both bank and larger nonbank student loan servicers are held accountable for how they treat consumers.
The rule will cover servicing of both federal and private student loans. Federal loans and private student loans are serviced by nonbanks. Any nonbank servicer that handles more than one million borrower accounts will be subject to supervisory authority under the rule.
The Bureau will be able to supervise the entire life of a private student loan. The Bureau already supervises private student loan origination and debt collection practices. With this rule, the CFPB will be able to supervise the entire life of private student loans—from origination through servicing to debt collection. – Source