Student Loan Servicers May Be Regulated by CFPB
The Consumer Financial Protection Bureau has proposed a new rule that would allow it to supervise some nonbank student loan servicers and bring new regulation to a quickly expanding market. The new rule would let the CFPB access the whole process of student lending, from issuing loans to debt collection and credit reporting.
“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,” said CFPB Director Richard Cordray. “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.”
The CFPB currently oversees student loan servicing at larger banks. The rule would push that supervision to certain nonbanks, making both banks and nonbanks follow the same rules in the student loan servicing market. The majority of student loan servicing is conducted by nonbank servicers.
The new rule would make any nonbank student loan servicer that handles more than one million borrower accounts subject to CFPB supervisory authority. This would include the seven largest student loan servicers with a combined 49 million loan accounts. This includes servicing of both federal and private student loans.
Student loan servicers are often different from lenders. They collect payments from borrowers and send them to the loan holders. The CFPB has already defined larger participants in consumer reporting and debt collection.
Outstanding student loan debt was approximately $1.1 trillion at the end of 2012, the largest category of non-mortgage debt in the United States. From the academic year 2001-2002 to 2011-2012, the average total borrowing per student increased by 55 percent.
The average student loan debt for 2011 graduates was $22,900.