CFPB Director Richard Cordray announced the commencement of a CFPB “public inquiry” into the hurdles that make repayment of student loans a “stressful process and even at times a harmful one.” Speaking in Milwaukee, Wisconsin today at a field hearing on student loan servicing, Cordray noted that the purpose of the Request for Information (RFI) is to “find ways to put the ‘service’ back into the student loan servicing market and help people avoid unnecessary defaults.” In its press release, the CFPB further explained the focus of the RFI: “The issues that the Bureau is seeking information on include: industry practices that create repayment challenges, hurdles for distressed borrowers, and the economic incentives that may affect the quality of service.” While much of the CFPB’s focus on loan servicing has been in the residential lending space, today’s announcement signals that the CFPB is leveraging its residential lending rulemaking, supervision, and enforcement expertise to evaluate practices in the student loan servicing market.
The initiatives announced today build upon the CFPB’s efforts to better understand the student loan servicing market, which began two years ago when it issued a public notice and held a hearing on the issue. Indeed, today’s hearing maintained a similar focus, namely the frustrations and difficulties of understanding when, where and how to pay back student debt. After Cordray’s opening remarks, Deputy Director Steven Antonakes led a panel of select representatives from consumer advocate groups, educational institutions, and various other industry organizations who commented and spoke on key issues related to student loan servicing. One thing that was clear throughout the hearing is the CFPB’s belief that the same issues that plagued the mortgage servicing industry are prevalent in the student loan space. Those familiar with the CFPB’s previous activities saw common themes throughout the hearing such as late fees, debt collection calls, service transfers, loss mitigation, error resolution, continuity of contact, record retention, and periodic billing statements. Cordray further highlighted the fact that there is no current comprehensive statutory framework governing these issues and appeared to intimate that such a framework would be forthcoming.
The 36-page RFI requests comments on or before July 13, 2015. The CFPB is accepting comments from a broad range of interested parties, including student loan borrowers, organizations representing students and student loan borrowers, institutions of higher education and affiliated parties, and financing services providers, including, but not limited to lenders and servicers in the mortgage, credit card, and student loan markets; credit reporting agencies; debt collectors; and civil rights groups.
The specific areas covered by the RFI are:
- Common practices, policies, and procedures in the student loan servicing market.
- Practices related to student loan repayment
- Practices related to student loan repayment for borrowers in distress
- Impact of practices related to student loan repayment for borrower segments with unique characteristics
- Applicability of consumer protections from other consumer financial product markets
- Requirements related to mortgage servicing practices
- Requirements related to mortgage servicing for borrowers in distress
- Requirements related to servicing practices in the credit card market
- Other requirements related to loan servicing
- Impact of limits on availability of data about student loan servicing and student loan repayment on borrowers