On July 7, 2015, the CFPB issued a report on issues faced by servicemembers regarding their rights and protections with regard to student loan servicing. The Bureau's report highlights several legal protections, including the Servicemembers Civil Relief Act (SCRA), Department of Defense Student Loan Repayment Programs, and loan forgiveness on certain federal loans for public service.
The CFPB's report was compiled from over 1,300 complaints submitted to the CFPB's complaint database. Of particular note, the Bureau states that it shared the complaints with the Department of Justice and the Federal Deposit Insurance Corporation, resulting in settlements between the DOJ and FDIC and Sallie Mae/Navient (available here and here).
In general, the report notes that many issues stem from inadequate disclosures and communication breakdowns between student loan services and servicemembers, as well as unfair or unlawful activity (which the report likens to the "failures in the mortgage servicing market . . . in the aftermath of the financial crisis"). The specific issues identified in the report include:
- Issues in processing SCRA-related requests;
- Errors leading to active-duty servicemember loans not being enrolled in deferment or other mitigation plans, or being sent to collection;
- Issues related to the discharge of disabled veterans' loans;
- Incorrect credit reporting, resulting in loans being reported as defaulted on, instead of discharged; and
- Issues related to service members' families, including parent co-signers.
The Bureau's report follows a May 2015 public inquiry into student loan servicing practices for all borrowers. This request for information may forecast new student loan servicing regulations similar to mortgage servicing rules.