The Consumer Financial Protection Bureau has announced a plan to provide additional oversight for student loan collections practices, helping to ensure that borrowers with student debt are not subject to the stress and difficulty of dealing with disorganized creditors.
Borrowers have reported a variety of different problems with student loan servicing companies that echo the problems of many borrowers with mortgages and consumer debt, including companies loosing paperwork, not applying payments to accounts, and a low level of customer service that makes it difficult to resolve issues. As with mortgages, car loans, or credit card debt, dealing with repeated collections calls about a specific account and having to go over the same information with every new agent assigned to the account is very stressful and unnecessarily time consuming.
The CFPB is looking to add regulations and oversight that would impact the largest non-bank student loan collection companies. In total, the student loan accounts for about 49 million borrowers would gain additional government oversight. The agency is already overseeing collections practices at the country's largest banks.
Oversight generally means that the agency will monitor the regular business practices of the lenders and collections companies, looking at how they process information and making sure that the collections practices do not violate new consumer protection laws.
This plan to add non-bank loan servicers to the list of entities supervised by the CFPB is still only a proposal, and the public has an opportunity to comment on the issue before it becomes an active regulation. While this proposal won't create complete oversight for student loan servicers, it will account for the vast majority of borrowers.
Source: The Washington Post, "Gov't consumer watchdog wants stricter oversight of student lenders as more borrowers default" The Associated Press, March 14, 2013
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