“Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules,” said CFPB Director Richard Cordray. “This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers.”
Under the new rule, the Bureau has the authority to supervise any non-bank servicer handling more than one million accounts to ensure they are complying with federal consumer financial laws. This puts the seven largest student loan servicers, responsible for a total of nearly 50 million accounts, under the agency’s umbrella.
Servicers who do not meet the 1 million account requirement may still be subject to the Bureau’s supervisory authority if the CFPB has reasonable cause to determine the servicer poses risk to consumers.
An October report from the CFPB on student loan servicing found numerous systemic problems within the industry.
Borrowers attempting to pay down their loans early were given inaccurate or incomplete information about how to get ahead on payments, or had payments applied to the wrong loan. People making partial payments sometimes found the servicers were applying the money in such a way as to maximize late fees. And when borrowers’ accounts got passed around from one servicer to another, there were complaints about lost paperwork, processing errors, and missing billing statements.
Another issue with accounts being transferred between servicers is inconsistent payment-processing policies. Borrowers complained to the CFPB that they would not be made aware of differences between servicers and then get penalized for not being aware of these differences.
“Borrowers who are doing their best to pay off their loans shouldn’t have to put up with the runaround and lousy customer service from loan servicers,” said Pamela Banks, senior policy counsel for Consumers Union. “Today’s rule will help ensure that loan servicers are held accountable for treating borrowers fairly and helping them manage their debts responsibly.”
If you’re a student loan borrower having a problem with your servicer, you can submit a complaint directly to the CFPB via its online student loan complaint portal.