Student Loan Servicers May Be Regulated by CFPB

Student Loan Servicers May Be Regulated by CFPB

March 19, 2013         Written By Bill Hardekopf

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.



The information contained within this article was accurate as of March 19, 2013. For up-to-date
information on any of the terms, cards or offers mentioned above, visit the issuer's website.


bill-hardekopf

About Bill Hardekopf

Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.
View all posts by Bill Hardekopf
Featured Limited/No Credit
Top Features : No annual fee; reports to major credit bureaus; access to higher credit line after making first 5 monthly payments on time
Featured Fair Credit Card
Top Features : No annual fee; access to higher credit line after making first 5 monthly payments on time
Featured Low Interest Card
Top Features : 1.25X miles on every purchase; no annual fee; bonus of 20,000 miles once $1,000 is spent in first 3 months
Featured Cash Back Card
Top Features : 1.5% cash back on all purchases; $150 bonus after spending $500 in first 3 months
Featured No Annual Fee Card
Top Features : 2% cash back on purchases: 1% when you buy plus 1% as you pay; 0% APR for 18 months on balance transfers
Featured Bad Credit Card
Top Features : Perfect credit not required; Reports to major credit bureaus