When you’re a student taking out a loan, should the amount of protection you get from fraud differ based on the size of the lender?
That is the question the Consumer Financial Protection Bureau is about to decide as it draws up new regulations for student loan servicers. If your instinctive answer is “no, it shouldn’t matter,” tell the CFPB your point of view before the May 28 comment deadline.
The CFPB’s current proposal involves extending its current supervisory policies to nonbank servicers with over 1 million customers and will allow the CFPB to audit loan servicers. This means their oversight would be extended to companies such as Sallie Mae that are contracted to service federal loans.
This isn’t enough. While lenders with over a million customers make up a large portion of the market, they only account for seven of the 23 servicers contracted by the federal government. People with student debt should have equal protection under the law. That means the CFPB must have the same rules for all student loan servicers and providers, whether they have one customer or one million.
The CFPB has argued that expansions of its supervisory powers are necessary because they have received reports of loan recipients getting the run-around from lenders on such issues as how much they owe or when a payment is credited to their account. Similar practices were uncovered in an investigation into lending practices last year by the Senate Committee on Education when investigating lending practices in the for-profit college industry.
This poses a real problem for students and begs the question: Why is the CFPB only going to regulate the seven largest loan servicers and not the entire industry? Frankly, there’s no suitable answer. As the recent case of a small business lender, Joon Park and Jade Capital & Investments LLC, shows, smaller loan servicers are just as likely to engage in fraudulent practices as their larger counterparts like Sallie Mae.
Further, all companies that use taxpayer dollars to service federal loans should be subject to the same oversight and regulation from the federal government. Why would we not want to regulate how taxpayer money is being spent – especially when it has such a massive impact on millions of Americans?
With the average student debt at $27,000, a national student debt of over $1 trillion and 60 percent of students borrowing annually, strong action is needed. The first step is encouraging the CFPB to regulate all loan servicers regardless of size. All consumers should be equally protected by the CFPB’s regulatory actions. What people with student loans need is real relief, not political maneuvering.
You can tell the CFPB what you think they need to do by clicking here and making sure they know that no student loan servicer is too small to regulate.