The CFPB Gives Student Loan Servicers Bad Grades in New Report (Card)
By: Steve Kaplan, Elyse Schoenfeld*, and Tori Shinohara
*Ms. Schoenfeld is not admitted in D.C. She is supervised by Melanie Brody, a member of the D.C. Bar.
On September 29, 2015, the CFPB issued a 151-page report that details perceived problems with student loan servicing practices and provides insight into the CFPB’s agenda for changes to the student loan industry. The report signifies increased efforts by the CFPB to address issues in student loan servicing and suggests that servicers will be subject to increased scrutiny in the future.
The report details comments the CFPB received in response to its May 2015 public inquiry seeking input on and recommendations for improving student loan servicing practices. The CFPB received more than 30,000 public comments from individual consumers, state attorneys general and banking regulators, trade associations, and other organizations. The report highlights comments on a host of problems borrowers are facing, including lost paperwork and payment processing errors, difficulties in correcting servicing errors, and issues accessing affordable repayment options or alternatives to avoid default. Commenters also responded to queries regarding the similarity of the problems facing the student loan servicing industry to issues in the mortgage market after the financial crisis, and suggested that the reforms made to mortgage practices could inform future changes to student loan servicing.