Request for Information Regarding Student Loan Servicing, 29302-29312 [2015-12276]
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Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Notices
comments must be received on or before
July 6, 2015.
ADDRESSES: There will be five scoping
meetings with the following dates/
times/locations:
1. Monday June 1, 2015, 6:00 p.m.
Hyatt Place Long Island/East End. 451 E
Main St, Riverhead, NY 11901.
Telephone: (631) 208–0002.
2. Tuesday June 2, 2015, 6:00 p.m.
Congress Hall Hotel. 251 Beach Ave,
Cape May, NJ 08204. Telephone: (888)
944–1816.
3. Tuesday June 16, 2015, 6:00 p.m.
Dare County Administrative Building.
Commissioners Meeting Room, 954
Marshall C. Collins Drive, Manteo, NC
27954. Telephone: (252) 475–5700.
4. Wednesday June 17, 2015, 6:00
p.m. Hilton Virginia Beach Oceanfront.
3001 Atlantic Ave, Virginia Beach, VA
23451. Telephone: (757) 213–3000.
5. Thursday, June 18, 5:00 p.m. Ocean
City Chamber of Commerce. Eunice Q.
Sorin Visitor & Conference Center.
12320 Ocean Gateway, Ocean City,
Maryland 21842. Telephone: (410) 213–
0552.
Comment addresses: Written
comments may be sent by any of the
following methods:
• Email to the following address:
jdidden@mafmc.org; Include ‘‘Blueline
Tilefish Scoping Comments’’ in the
subject line (recommended); there will
also be an online comment submission
form at https://www.mafmc.org/actions/
blueline-tilefish.
• Mail or hand-deliver to Dr.
Christopher M. Moore, Executive
Director, Mid-Atlantic Fishery
Management Council, 800 North State
Street, Suite 201, Dover, Delaware
19901. Mark the outside of the envelope
‘‘Blueline Tilefish Scoping Comments’’;
or
• Fax to (302) 674–5399.
• Comments may also be provided
verbally at any of the public scoping
meetings.
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FOR FURTHER INFORMATION CONTACT:
Christopher M. Moore, Ph.D., Executive
Director, Mid-Atlantic Fishery
Management Council; telephone: (302)
526–5255. The MAFMC’s Web site,
www.mafmc.org (see ‘‘Current Issues’’)
also has details on the meeting locations
and background materials. A scoping
informational document and
presentation recording will be posted to
https://www.mafmc.org/actions/bluelinetilefish no later than May 25, 2015.
SUPPLEMENTARY INFORMATION: The South
Atlantic Fishery Management Council
(SAFMC) manages blueline tilefish
south of the Virginia/North Carolina
border. There are currently (as of May
11, 2015) no management measures for
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blueline tilefish in Federal waters north
of North Carolina. Virginia and
Maryland have instituted regulations for
state waters, but catches in any Federal
waters north of North Carolina may be
landed from Delaware north without
restriction. Blueline tilefish are likely
susceptible to overfishing due to their
life history (relatively long-lived,
sedentary, slow growing, and late
maturing) so the MAFMC is considering
developing conservation and
management measures. These measures
could be considered via an amendment
to the MAFMC’s Golden Tilefish
Fishery Management Plan (FMP), or a
new FMP for blueline tilefish and/or
other deep-water fish such as sand
tilefish, snowy grouper, and blackbellied rosefish. Management measures
could include a definition of the
management unit, as well as acceptable
biological catches, annual catch limits,
essential fish habitat, trip limits and/or
minimum fish sizes for the commercial
or recreational fisheries, etc.
For waters north of North Carolina, in
response to recent catch increases, the
MAFMC has already requested NMFS
take emergency action to implement a
300-lb (136-kg) (whole weight)
commercial trip limit and a seven-fish
per person recreational possession limit.
This request was the result of a February
25, 2015, MAFMC meeting, the details
of which may be found at: https://
www.mafmc.org/briefing/2015/february2014-blueline-tilefish-webinar-meeting.
These emergency measures are intended
to prevent depletion of blueline tilefish
off the Mid-Atlantic on an interim basis
(for a maximum of 366 days) while the
Council develops long-term
management measures through the
normal Magnuson-Stevens Act process.
The SAFMC has also requested that
NMFS (via an emergency rule) extend
management measures recently enacted
in the Southeastern Region (March 30,
2015; 80 FR 16583) north to apply to all
Federal waters off the U.S. East Coast.
Because any emergency rule can only be
in effect for a maximum of 366 days, the
MAFMC is moving ahead with scoping
for an amendment or new FMP to
develop long-term management and
conservation measures for blueline
tilefish off the Mid-Atlantic.
This is the first and best opportunity
for members of the public to raise
concerns related to the scope of issues
that will be considered in the Council’s
action. The MAFMC needs your input
both to identify management issues and
develop effective alternatives. Potential
management measures could include a
definition of the management unit, as
well as acceptable biological catches,
annual catch limits, essential fish
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habitat, trip limits and/or minimum fish
sizes for the commercial or recreational
fisheries, and/or other measures that
may be deemed appropriate. Your
comments early in the FMP/amendment
development process will help us
address issues of public concern in a
thorough and appropriate manner.
Comment topics could include the
scope of issues in the FMP or
amendment, concerns and potential
alternatives related to blueline tilefish
management. Comments can be made
during the scoping hearings as detailed
above or in writing. After scoping, the
MAFMC plans to develop a range of
management alternatives to be
considered and prepare a draft
environmental impact statement (EIS)
and/or other appropriate environmental
analyses. A new FMP would require an
EIS, while an amendment to the existing
Golden Tilefish FMP may require an EIS
or an Environmental Assessment. These
analyses will consider the impacts of
the management alternatives being
considered, as required by National
Environmental Policy Act. Following a
review of any comments on the draft
analyses, the MAFMC will then choose
preferred management measures for
submission with a Final EIS or
Environmental Assessment to the
Secretary of Commerce for review and
consideration for approval. Approved
management measures would be
implemented through publication of
proposed and final rules, which include
additional opportunity for public
comment.
Special Accommodations
These meetings are physically
accessible to people with disabilities.
Requests for sign language
interpretation or other auxiliary aid
should be directed to M. Jan Saunders,
(302) 526–5251, at least 5 days prior to
the meeting date.
Dated: May 14, 2015.
Emily H. Menashes,
Acting Director, Office of Sustainable
Fisheries, National Marine Fisheries Service.
[FR Doc. 2015–12261 Filed 5–20–15; 8:45 am]
BILLING CODE 3510–22–P
BUREAU OF CONSUMER FINANCIAL
PROTECTION
[Docket No. CFPB–2015–0021]
Request for Information Regarding
Student Loan Servicing
Bureau of Consumer Financial
Protection.
AGENCY:
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Federal Register / Vol. 80, No. 98 / Thursday, May 21, 2015 / Notices
Comments must be received on
or before July 13, 2015.
ADDRESSES: You may submit comments,
identified by Docket No. CFPB–2015–
0021, by any of the following methods:
• Electronic: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Email:
FederalRegisterComments@cfpb.gov.
Include Docket No. CFPB–2015–0021 in
the subject line of the message.
• Mail: Monica Jackson, Office of the
Executive Secretary, Consumer
Financial Protection Bureau, 1700 G
Street NW., Washington, DC 20552.
• Hand Delivery/Courier: Monica
Jackson, Office of the Executive
Secretary, Consumer Financial
Protection Bureau, 1275 First Street NE.,
Washington, DC 20002.
Instructions: All submissions should
include the agency name and docket
number for this proposal. Because paper
mail in the Washington, DC area and at
the Bureau is subject to delay,
commenters are encouraged to submit
comments electronically. In general, all
comments received will be posted
without change to https://
www.regulations.gov. In addition,
comments will be available for public
inspection and copying at 1275 First
Street NE., Washington, DC 20002, on
official business days between the hours
of 10 a.m. and 5 p.m. eastern standard
time. You can make an appointment to
inspect the documents by telephoning
(202) 435–7275.
All comments, including attachments
and other supporting materials, will
become part of the public record and
subject to public disclosure. Sensitive
personal information, such as account
numbers or social security numbers,
should not be included. Comments
generally will not be edited to remove
any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: For
general inquiries, submission process
questions or any additional information,
please contact Monica Jackson, Office of
the Executive Secretary, at 202–435–
7275.
SUPPLEMENTARY INFORMATION: The
Consumer Financial Protection Bureau
is engaged in a joint effort with the U.S.
Department of Education and the U.S.
Department of the Treasury to identify
initiatives to strengthen student loan
servicing. This request seeks comments
related to the critical role that servicing
plays in facilitating repayment of
student loans, in order to improve
customer service, identify innovative
practices and business models, and
assess the current framework that exists
regarding the consumer protection for
student loan borrowers in repayment.
The submissions to this request for
information may serve to assist federal
and state agencies in prioritizing
resources and to assist financial services
providers in developing best practices.
The public comments may also be used
to inform a report required by a
Presidential Memorandum signed on
March 10, 2015.1
The deadline for submission of
comments is July 13, 2015.
The Bureau encourages comments
from the public, including:
• Student loan borrowers;
• Organizations representing students
and student loan borrowers;
• Innovators, technology providers,
and recent entrants into the student loan
market;
• Institutions of higher education and
affiliated parties;
• Financing services providers,
including but not limited to lenders and
servicers in the mortgage, credit card,
and student loan markets;
1 The White House, Presidential Memorandum—
Student Aid Bill of Rights (March 10, 2015),
available at https://www.whitehouse.gov/the-pressoffice/2015/03/10/presidential-memorandumstudent-aid-bill-rights.
2 U.S. Department of Education, Federal Student
Aid Portfolio Summary, Data Center: Federal
Student Loan Portfolio, accessed on 3/30/2015,
available at https://studentaid.ed.gov/about/datacenter/student/portfolio; Consumer Financial
Protection Bureau and U.S. Department of
Education, Private Student Loans (2012), available
at https://www.consumerfinance.gov/reports/privatestudent-loans-report/; and U.S. Department of
Education, Federal Student Aid Annual Report
2014 (2014), available at https://www2.ed.gov/about/
reports/annual/2014report/fsa-report.pdf.
3 For example, under the Home Mortgage
Disclosure Act, most loan-level mortgage
application, origination, and purchase data is
currently subject to public disclosure, stripped of
certain information to protect borrower privacy.
The CFPB developed and maintains a web tool to
allow the public to access and analyze HMDA data.
See Consumer Financial Protection Bureau, The
Home Mortgage Disclosure Act, available at https://
www.consumerfinance.gov/hmda. In addition, data
from housing GSEs and mortgage-backed securities
filings shed significant light on loan-level
performance. The Office of the Comptroller of the
Notice and request for
information.
ACTION:
The Bureau of Consumer
Financial Protection (Bureau or CFPB) is
seeking comments from the public
related to the market for student loan
servicing. The submissions to this
request for information will serve to
assist market participants and
policymakers on potential options to
improve borrower service, reduce
defaults, develop best practices, assess
consumer protections, and spur
innovation.
SUMMARY:
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• Trust administrators of student loan
asset-backed securities;
• Credit reporting agencies;
• Debt collectors;
• Organizations promoting financial
education;
• Civil rights groups; and
• Nationally recognized statistical
rating organizations.
Please note that the Bureau is not
soliciting individual student account
information in response to this notice
and request for information, nor is the
Bureau seeking personally identifiable
information (PII) regarding student
accounts from the parties or any third
party.
All comments, including attachments
and other supporting materials, will
become part of the public record and
subject to public disclosure. Sensitive
personal information, such as account
numbers or social security numbers,
should not be included. Comments
generally will not be edited to remove
any identifying or contact information.
Part A: Issues Related to Student Loan
Repayment
The Student Loan Market
In the last decade, the student loan
market has undergone rapid growth and
change. Today, the Consumer Financial
Protection Bureau (the Bureau)
estimates that there are over 40 million
borrowers with student loans who
collectively owe over $1.2 trillion.2
Student debt is the largest category of
unsecured debt owed by American
consumers.
Compared to other large markets of
consumer financial products (such as
residential mortgages and credit cards),3
availability of market data is quite
limited, particularly for private student
loans, which grew rapidly in the years
leading up to the financial crisis.4 Based
on the Bureau’s analysis of various
sources, such as consumer credit panels,
audited financial statements, and
consumer surveys, both the number and
proportion of student loan borrowers in
a repayment status has grown.
Currency regularly publishes a mortgage metrics
report, detailing loan modification performance and
other key servicing data.
See, for example, Office of the Comptroller of the
Currency, Mortgage Metrics Report for 2014 Q4
(March 2015), available at https://www.occ.gov/
publications/publications-by-type/otherpublications-reports/mortgage-metrics/mortgagemetrics-q4-2014.pdf.
4 Consumer Financial Protection Bureau and U.S.
Department of Education, Private Student Loans
(2012), available at https://www.consumer
finance.gov/reports/private-student-loans-report/.
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While the features and borrower
characteristics of each type of student
loan may vary, the three major types of
student loans currently outstanding, as
described below, are generally serviced
by the same market participants.
The three main types of postsecondary education loans under which
borrowers have outstanding balances are
loans made under the Federal Family
Education Loan program (FFELP), loans
made under the William D. Ford Federal
Direct Loan (Direct Loan) program, and
private student loans. Direct Loans and
private student loans are still available
for new originations.6
Federal Family Education Loans:
More than $380 billion 7 in outstanding
student loans were made under FFELP.8
While FFELP loans were generally
originated using private capital, they
were guaranteed by a governmental or
not-for-profit entity, and reinsured by
the Federal government. These loans are
serviced either by the loan holders
themselves or by a third-party student
loan servicer pursuant to contracts with
the loan holders. A noteworthy portion
of these loans serve as collateral for
asset-backed securities.9 Pursuant to the
5 U.S. Department of Education, Federal Student
Aid Annual Report (2007–2014), available at https://
www2.ed.gov/about/reports/annual/.
6 There are additional Federal programs under
Title IV which also authorize student loans. For
example, one such program finances loans made
directly by certain post-secondary education
institutions through their financial aid offices. See
20 U.S.C. 1087aa et seq. Another offers grants to
those who pledge to become teachers. If the
recipients do not become teachers, then the
disbursed funds are converted from grants to loans.
See 20 U.S.C. 1070g et seq.
7 U.S. Department of Education, Federal Student
Aid Portfolio Summary, Data Center: Federal
Student Loan Portfolio, accessed on 5/6/2015,
available at: https://studentaid.ed.gov/about/datacenter/student/portfolio.
8 20 U.S.C. 1078(b), (c).
9 See, for example, Sallie Mae, SLM Corporation:
Overview of FFELP and FFELP ABS Transactions
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2010 SAFRA Act, the origination of new
guaranteed loans under FFELP was
suspended.
Federal Direct Loans: Pursuant to
SAFRA, the Department of Education
shifted primarily to direct lending,
providing loans directly to borrowers
under the William D. Ford Federal
Direct Loan program.10 As of the end of
calendar year 2014, 28.5 million
borrowers collectively owed
approximately $744 billion in
outstanding Direct Loans.11 Direct
Loans are serviced by third parties that
contract with the Department of
Education pursuant to Title IV of the
Higher Education Act (HEA).12
Preceding the suspension of new FFELP
originations, many of the FFELP student
loan servicers were awarded servicing
contracts to begin servicing loans held
by the Department of Education,
including loans made under the Direct
Loan program.13
(June 18, 2012), available at https://
www.navient.com/assets/about/investors/webcasts/
2012FFELPOverviewvFinal.pdf.
10 See Public Law 111–152, secs. 2101–2213, 124
Stat. 1071 (2010). The Direct Loan Program actually
began in 1992, see Public Law 102–325, 106 Stat.
569 (1992), but Federal Direct loans constituted
only a small portion of Federal student lending
before the enactment of the SAFRA Act in 2010.
11 U.S. Department of Education, Federal Student
Aid Portfolio Summary, Data Center: Federal
Student Loan Portfolio, accessed on 5/7/2015,
available at: https://studentaid.ed.gov/about/datacenter/student/portfolio.
12 20 U.S.C. 1087f(b).
13 In 2008, the enactment of the Ensuring
Continued Access to Student Loans Act (ECASLA)
authorized the Secretary of Education to take
extraordinary measures to ensure students could
continue to borrow amid turmoil in the capital
markets. Under this authority, the Department of
Education acquired a large volume of loans made
by private lenders through FFELP and assigning the
servicing to certain third parties. See Pub. L. 110–
227; following the termination of the FFEL program,
third-party servicers were awarded additional
Direct Loan volume through this contract. For
further discussion, see U.S. Department of
Education, Loan Servicing Update (July 2012)
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Private Student Loans: The student
loan market includes private student
loans, which are not originated pursuant
to Title IV of the HEA. Most private
student loans are typically originated by
very large depository institutions and
specialty student loan companies. A
substantial portion of private student
loans serve as collateral for asset-backed
securities. The market for private
student loans is opaque, as market
participants generally do not make
available key origination and
performance information, and reporting
requirements on outstanding balances
and performance are extremely limited.
The vast majority of student loan
servicing activity is now concentrated
among large student loan servicers that
service all three types of student
loans.14
The Student Loan Servicing Business
Model
More than 40 million Americans with
student loan debt depend on student
loan servicers as their primary point of
contact for their student loans. A
servicer is often different than the
lender or loan holder, and borrowers
almost always lack control or choice
over which company services their loan.
Student loan servicers’ duties typically
include managing borrowers’ accounts,
processing monthly payments, and
communicating directly with
borrowers.15 These duties may also
available at www.ifap.ed.gov/presentations/
attachments/
NASFAA2012LoanServicingUpdate.ppt.
14 For further discussion of student loan servicing
market composition, see Consumer Financial
Protection Bureau, Final Rule: Defining Larger
Participants of the Student Loan Servicing Market
(December 2013), available at https://
files.consumerfinance.gov/f/201312_cfpb_studentservicing-rule.pdf.
15 The Bureau defined student loan servicing as
(1) receiving loan payments (or receiving
notification of payments) and applying payments to
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include informing borrowers about loan
repayment options and facilitating
enrollment in alternative repayment
plans and other benefits, including
options to assist federal student loan
borrowers experiencing financial
hardship.16
When problems arise because of
servicing problems, student loan
borrowers may face a range of different
consequences. They may miss a
payment, owe more money because of
additional interest on principal, or face
future difficulties with credit because of
a poor payment history.
For the majority of student loan
borrowers who make payments on time
each month and never contact their
servicer for additional assistance, loan
servicing generally may be limited to
accepting and applying monthly
payments and awarding benefits earned
by satisfying specific loan terms (e.g.
interest rate reductions for enrolling in
auto-debit or making a series of on-time
monthly payments). These borrowers
also depend on their student loan
servicers to accurately report their
payment history to the credit bureaus.
Adequate student loan servicing is
critical for these borrowers to establish
a good credit history through their
timely student loan payments, in order
to ensure that they are positioned to
participate fully in the marketplace for
other financial products and services.17
Student loan borrowers facing
unemployment or other financial
hardship need adequate loan servicing
for a different reason. Student loan
servicers assist these borrowers with
enrolling in alternative repayment
plans, obtaining deferments or
the borrower’s account pursuant to the terms of the
post-secondary education loan or of the contract
governing the servicing; (2) during periods when no
payments are required, maintaining account records
and communicating with borrowers on behalf of
loan holders; or (3) interactions with borrowers,
including activities to help prevent default,
conducted to facilitate the foregoing activities. See
12 CFR 1090.106.
16 See, for example, 20 U.S.C. 1098e.
17 In addition, certain consumer protections
included in Title IV of the Higher Education Act
require student loan borrowers to remit on-time
monthly payments under certain repayment
arrangements in order to obtain loan forgiveness.
These repayment arrangements may require student
loan servicers to certify income documentation on
an annual basis in order for borrowers to obtain the
maximum benefit. In some cases, loan forgiveness
is also contingent upon certain types of
employment. Student loan servicers are responsible
for evaluating the timeliness of monthly payments,
evaluating whether employment qualifies a
borrower for certain benefits and applying these
benefits to borrowers’ accounts. Depending on the
program, high-quality student loan servicing over a
period of 5, 10, 20 or 25 years is critical for these
borrowers to realize benefits provided by statute.
See, for example, 20 U.S.C. 1078–10 and 20 U.S.C.
1087e(m).
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forbearances, or requesting a
modification of loan terms. For these
borrowers, proper loan servicing may be
the key to successfully avoid default
and ultimately perform on the loan.
When borrowers face difficulties, loan
servicers can help borrowers avoid
default, minimize damage to borrowers’
credit, and ensure that borrowers can
find sustainable solutions that keep
them on a long-term path to future
financial success. In addition, adequate
loan servicing also helps to ensure that
owners of the loans are repaid.
Financial Incentives for Student Loan
Servicers
The Bureau estimates that there are
nearly 8 million student loan borrowers
in default, representing over $110
billion in balances.18 In addition, the
Department of Education estimates that
another 3 million Direct Loan borrowers
are at least 30 days past due on one or
more student loans, comprising over
$58 billion in balances.19 As the number
of borrowers with defaulted or
delinquent student loans has grown,20 it
has prompted questions about what
steps servicers should take to achieve
greater success in minimizing defaults
and curing delinquencies. For example,
it appears that few, if any, private
student lenders and loan servicers have
developed transparent, widely-offered
flexible repayment options to mitigate
defaults for borrowers in distress.21
While federal student loans feature an
array of flexible repayment options, it is
not clear whether third-party student
loan servicers, particularly those
servicing Federal Family Education
Loans, have adequate economic
18 As of the first quarter of FY15, 7.3 million
federal student loan borrowers were in default on
more than $106 billion in federal student loans.
See, U.S. Department of Education, Federal Student
Aid Portfolio Summary, Data Center: Federal
Student Loan Portfolio, accessed on 5/7/2015,
available at: https://studentaid.ed.gov/about/datacenter/student/portfolio; According to a 2012 study
of the private student loan market published by the
U.S. Department of Education and the Consumer
Financial Protection Bureau, 850,000 private
student loans with an outstanding principal balance
of over $8 billion were in default. See U.S.
Department of Education and Consumer Financial
Protection Bureau, Private Student Loans (2012),
available at https://www.consumerfinance.gov/
reports/private-student-loans-report/.
19 U.S. Department of Education, Federal Student
Aid Portfolio Summary, Data Center: Federal
Student Loan Portfolio, accessed on 3/30/2015,
available at: https://studentaid.ed.gov/about/datacenter/student/portfolio.
20 Consumer Financial Protection Bureau, A
closer look at the trillion (August 5, 2013), available
at https://www.consumerfinance.gov/blog/a-closerlook-at-the-trillion/.
21 Consumer Financial Protection Bureau, Annual
Report of the CFPB Student Loan Ombudsman
(2014), available at https://files.consumerfinance.
gov/f/201410_cfpb_report_annual-report-of-thestudent-loan-ombudsman.pdf.
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incentive to enroll borrowers in these
options to avoid default. For both
private and federal student loans, the
compensation model used in most thirdparty servicing contracts provides
student loan servicers with a flat
monthly fee per account serviced.22
Although this fee may adjust based on
a loan’s repayment status, fees are
generally fixed on a monthly basis and
do not rise or fall depending on the
level of service a particular borrower
requires in a given month.
The Regulatory Landscape for Student
Loan Servicing
In recent years, policymakers have
undertaken broad-based legislative and
regulatory efforts to strengthen
applicable federal consumer financial
laws protecting consumers in the
servicing of mortgages and credit cards.
For student loan borrowers, there is no
existing, comprehensive federal
statutory or regulatory framework
providing uniform standards for the
servicing of all student loans.23
However, there are limited protections
for certain federal student loan
borrowers related to certain aspects of
the repayment process.24
There may be variation in the level of
service delivered by student loan
22 This monthly servicing fee may be set as a flat
dollar amount per month per account, or set based
on a percentage of a borrower’s aggregate principal
balance. In both cases, the fee paid to student loan
servicers may vary depending on repayment status
but generally do not vary depending on the level
of service provided in a given month. See, for
example, First Marblehead Corporation, Prospectus
Supplement: The National Collegiate Student Loan
Trust 2007–3 (September 17, 2007), available at
https://www.snl.com/interactive/lookandfeel/
4094003/NCSLT_2007_3_FPS.PDF and U.S.
Department of Education, Title IV Redacted
Contract Awards 12–13, available at https://www.
fbo.gov/spg/ED/FSA/CA/FSA-TitleIV-09/
listing.html. Contracts fix monthly compensation on
a per-borrower basis, and the compensation
depends on the repayment status of each borrower
being serviced. See also U.S. Department of
Education, Student Aid Administration Fiscal Year
2015 Request, at AA–15, available at https://www2.
ed.gov/about/overview/budget/budget15/
justifications/aa-saadmin.pdf. This estimates the
average cost per-borrower to be $1.67 per month,
based on the contractual prices and the proportion
of borrowers with different repayment statuses.
23 In 2014, the Bureau expanded its examination
program for student loan servicing to supervise both
large depository institutions and larger nonbank
student loan servicers for compliance with federal
consumer law, including the prohibition against
unfair, deceptive and abusive practices under the
Dodd-Frank Act. This is the first examination
program at the federal level focused on both bank
and nonbank actors in the student loan servicing
market. See Consumer Financial Protection Bureau,
Education Loan Examination Procedures (December
2013), available at https://files.consumerfinance.gov/
f/201312_cfpb_exam-procedures_educationloans.pdf.
24 See, e.g., 34 CFR part 682 for certain
disclosures and other requirements for companies
servicing FFELP loans.
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servicers depending on the type of loan
borrowed, the identity of lender, or the
company selected to service the loan.
The statutory and regulatory framework
for student loan servicing, and the gaps
in that framework, may contribute to
this variation.
Higher Education Act of 1965 (HEA)
Title IV of HEA authorizes the federal
student loan programs and establishes a
framework for conduct by and oversight
of companies participating in FFELP,
including student loan servicers
contracted by holders of FFELP loans to
service these loans. This framework
establishes a number of conditions that
loan holders and service providers must
meet in order for federal loan guarantees
to remain in effect, including arranging
for periodic independent financial
audits and complying with program
requirements established in
implementing regulations.25
Congress has amended Title IV of
HEA periodically since its enactment,
creating a set of flexible repayment
plans, loan cancellation options, and
other protections for borrowers with
federal student loans.26 Student loan
servicers are responsible for
administering these benefits and
protections. In addition, these
amendments have expanded the
extraordinary collection tools available
to recover defaulted federal student
loans, including extra-judicial wage
garnishment, tax refund offset, and
seizure of federal payments, such as
certain benefits administered by the
Social Security Administration.27
Amendments to the Higher Education
Act Included in the Higher Education
Opportunity Act (HEOA) of 2008
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In 2008, Congress enacted HEOA,
reauthorizing HEA and amending Title
IV to provide additional protections for
borrowers with loans made through
FFELP. Implementing regulations
require student loan servicers to provide
certain notices to borrowers with FFELP
loans during the course of repayment,
including notices related to account
terms, repayment plans, and servicing
25 See, e.g., 34 CFR 682.401; 682.416. In addition,
HEA establishes a number of conditions related to
the origination of federal student loans, including
specific requirements related to disclosure and
counseling at the time of origination and prior to
entering repayment.
26 See, for example, Pub. L. 110–84.
27 For example, the Higher Education Technical
Amendments of 1991 eliminated the statute of
limitations for lawsuits to collect of federal student
loan debt. See Pub. L. 102–26. In addition, a
number of other federal laws govern the collection
of debts owed to the federal government. See, for
example, Pub. L. 104–134.
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transfers.28 These regulations create
basic compliance requirements as a
precondition for student loan servicers
to maintain eligibility to participate in
FFELP.
Amendments to the Truth in Lending
Act (TILA) Included in HEOA
HEOA also amended TILA to create
new protections for borrowers with
private education loans, largely related
to the origination of these loans.29 These
protections include safeguards to
mitigate the risk that private student
lenders will extend credit to borrowers
to cover expenses beyond the total cost
of attendance and requirements for
schools entering into preferred lender
arrangements with lenders seeking to
market private loans to students.30
Fair Credit Reporting Act (FCRA)
FCRA and its implementing
regulation, Regulation V, require entities
that furnish information to consumer
reporting agencies to have reasonable
policies and procedures regarding the
accuracy and integrity of information
they furnish.31 While furnishing is
generally a voluntary activity,32 federal
student loan servicers have an
affirmative duty to furnish. Title IV of
HEA requires that certain participants in
the student loan market furnish
information about federal student loans
to consumer reporting agencies.33
Risks for Consumers Repaying Student
Loan Debt
In July 2011, the Bureau launched an
examination program to supervise
education lending and servicing at the
largest depository institutions.34 In
28 See Pub. L. 110–315. For example, servicers
must provide borrowers with a notice of servicing
transfer containing information about the new
servicer 45 days after the effective date of transfer—
a protection that has been triggered for more than
10 million student loan borrowers since 2010. This
requirement of notice does not require any notice
to the borrower prior to the effective date of
transfer. In contrast, protections offered to mortgage
borrowers under the Real Estate Settlement
Procedures Act (RESPA) requires notice of a
servicing transfer 15 days prior to and 15 days after
the effective date of transfer.
29 Pub. L. 110–315, 15 U.S.C. 1650.
30 TILA and its implementing regulation,
Regulation Z, explicitly exempt credit extended
pursuant to Title IV of the Higher Education Act
from requirements established for private education
loans. See 15 U.S.C. 1650a(7)(A)(i).
31 See 15 U.S.C. 1681–1681x; and 12 CFR part
1022.
32 See 15 U.S.C. 1681s and 12 CFR part 1022,
App. E (‘‘The Bureau encourages voluntary
furnishing of information to consumer reporting
agencies.’’).
33 See, for example, 20 U.S.C. 1080a.
34 In December 2012, the Bureau published the
examination procedures used in examinations of
student lending at these institutions. See Consumer
Financial Protection Bureau, CFPB Releases Exam
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December 2013, the Bureau finalized a
rule expanding its supervisory authority
to include large nonbank participants in
the student loan servicing market—the
companies that perform more than 70
percent of all nonbank student loan
servicing activity, including those
student loan servicers contracted by the
Department of Education to service the
federally-owned loan portfolio.35
Nonbank entities perform the vast
majority of student loan servicing
activity.36 Historically, these entities
have not been subject to federal or state
licensing requirements or supervision
for compliance with federal consumer
protection laws.
In October 2011, the Secretary of the
Treasury designated a student loan
ombudsman within the Bureau,
pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act
(Dodd-Frank Act). The Bureau’s student
loan ombudsman is required to submit
certain reports to the Director of the
Bureau, the Secretary of the Treasury,
and the Secretary of Education related
to student loan complaints.37 These
reports have focused on private student
loans and highlighted a range of
consumer complaints submitted to the
Bureau regarding servicing issues,
including:
• Payment posting: Some consumers
have reported that it takes servicers
several days to process payments and
servicers may charge interest on the
outstanding principal during that
processing time. Consumers have
complained that servicers may also
apply payments to an account well after
they debit funds from a borrower’s bank
account. Consumers note that some
servicers may take several days to
process payments submitted online,
when other financial services
companies are able to credit such
payments upon receipt.
• Processing prepayments:
Consumers may attempt to prepay their
Procedures for Student Loans (2012), available at
https://www.consumerfinance.gov/newsroom/
consumer-financial-protection-bureau-releasesexam-procedures-for-student-loans/.
35 Consumer Financial Protection Bureau, Final
Rule: Defining Larger Participants of the Student
Loan Servicing Market (December 2013), available
at https://files.consumerfinance.gov/f/
201312_cfpb_student-servicing-rule.pdf.
36 For further discussion of student loan servicing
market composition, see Consumer Financial
Protection Bureau, Final Rule: Defining Larger
Participants of the Student Loan Servicing Market
(December 2013), available at https://
files.consumerfinance.gov/f/201312_cfpb_studentservicing-rule.pdf.
37 See 12 U.S.C. 5535. In addition, the Higher
Education Act established a Student Loan
Ombudsman at the U.S. Department of Education
to assist borrowers with federal student loans. See
20 U.S.C. 1018.
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loans in order to reduce the amount of
interest owed over the life of the loan.
But many consumers have expressed
confusion about how to pay off their
loans early. For example, borrowers
have complained that servicers apply
payments in excess of the amount due
across all their loans, not to the highestinterest rate loan that they would prefer
to pay off first. These processing
problems may result from insufficient
investment in a servicing platform’s
information technology infrastructure.
• Processing partial payments: When
consumers have multiple loans with one
servicer and are unable to pay all of the
loans on their bill in full, borrowers
have reported that many servicers
instruct them to make whatever
payment they can afford. Many
complaints have described how
servicers often divide up the partial
payment and apply it evenly across all
of the loans in their account. This may
maximize the late fees charged to the
consumer.
• Paperwork and account
information: Consumers have reported
experiencing lost paperwork submitted
to process applications for forbearance
or alternative payment plans. Borrowers
have reported that servicers do not
correct errors in a timely fashion.
Consumers have also reported
encountering limited access to basic
account information, including their
payment history. Some borrowers have
reported difficulty when seeking to
determine how their payments have
been applied to interest and principal,
particularly when loans are grouped
together for billing purposes.
• Servicing transfers: Consumers have
noted many servicing interruptions
following a change in servicer. Many of
these consumers were unaware that
their loans had been transferred to a
new servicer until the point at which
they encountered a problem. Consumers
have explained that, following a change
in servicer, they experience
interruptions when receiving billing
statements, notices, or other routine
communications. Consumers have also
noted that they were charged late fees
because borrowers mailed their
payments to their old servicers.
Consumers have complained that, in
some cases, servicers did not process
payments correctly post-transfer, if the
consumer mailed a check to the new
servicer containing account information
from the old servicer.
• Customer service: Consumers have
complained that servicing personnel
may not be adequately trained to
provide assistance or may be unaware of
resources available to borrowers in
distress. This problem may be
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exacerbated at companies that service
many different loan portfolios for thirdparty lenders. Consumers have reported
that servicers transferred them to
multiple departments, and, in some
cases, none were responsive or
empowered to provide a clear answer.
Consumers have also complained about
being unable to reach appropriate
service staff members to correct a
mistake in how a payment was applied
to their account. Other consumers have
complained about conflicting
instructions from different employees of
the same servicer.
• Repayment incentives: It is common
for lenders to offer various incentives to
borrowers in marketing materials prior
to origination. These might include
interest rate or principal reductions for
engaging in activities that increase the
likelihood of repayment, such as
graduation or enrollment in an autodebit program. But consumers have
complained that some servicers place
unexpected obstacles when borrowers
seek to apply these benefits.
• Issues related to co-signers,
including acceleration of performing
loans: Consumers identify a range of
issues specific to co-signed student
loans, including problems related to
access to basic account information for
co-signers and problems related to cosigner release, an advertised benefit of
many private loans that some
consumers find is prohibitively
complicated to obtain. In addition,
many consumers assume that the death
of a co-signer, often a parent or
grandparent, will result in the release of
the co-signer’s obligation to repay. But
many private student loan contracts
include provisions that have been
interpreted to provide the lender with
the option to immediately demand the
full loan balance upon death of the cosigner. Many private student loan
contracts also include provisions that
have been interpreted to allow the
lender to place a loan in default if the
borrower’s co-signer files for
bankruptcy.
Borrowers have submitted complaints
detailing how they face loan
acceleration, including consequences
such as credit damage and frequent debt
collection calls, even if the loan was in
good standing prior to and while the cosigner is in bankruptcy, or upon a cosigner’s death. Acceleration may be
triggered when data from probate and
other court record scans are matched
with a company’s customer database,
without regard to whether the borrower
is in good standing.
• Benefits for members of the
military: Servicemembers have
identified problems they encountered
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29307
when accessing the protections granted
to them under federal rules, including
the Servicemembers Civil Relief Act
(SCRA). The hurdles they describe range
from not being able to get the
information they need, to being met
with roadblocks when they do try to
pursue their benefits.
As noted in these reports, consumer
complaints are not necessarily
representative of typical experiences of
student loan borrowers. However,
examination and investigative activities
have revealed that problems may not be
limited to individual consumers filing
complaints. For example, in 2014, the
Federal Deposit Insurance Corporation
(FDIC) addressed alleged misconduct
with one large student loan servicer for
illegal practices regarding student loan
payment processing.38 The FDIC found
violations of a federal law prohibiting
unfair and deceptive practices with
regard to student loan borrowers
through the servicer’s following actions:
• Inadequately disclosing its payment
allocation methodologies to borrowers
while allocating borrowers’
underpayments across multiple loans in
a manner that maximizes late fees; and
• Misrepresenting and inadequately
disclosing in its billing statements how
borrowers could avoid late fees.
In addition, the Department of Justice
joined with the FDIC to enter an order
providing $60 million in restitution for
more than 60,000 servicemembers in an
action against the same company,
related to its awarding of benefits under
the SCRA to active duty members of the
military.39 The FDIC found illegal
conduct, including:
• Unfairly conditioning receipt of
benefits under the SCRA upon
requirements not found in the law;
• Improperly advising
servicemembers that they must be
deployed in order to receive benefits
under the SCRA; and
• Failing to provide complete SCRA
relief to servicemembers after having
been put on notice of these borrowers’
active duty status.
While supervising for compliance
with federal consumer financial laws,
38 Federal Deposit Insurance Corporation, FDIC
Announces Settlement with Sallie Mae for Unfair
and Deceptive Practices and Violations of the
Servicemembers Civil Relief Act (May 2014),
available at https://www.fdic.gov/news/news/press/
2014/pr14033.html.
39 See Federal Deposit Insurance Corporation,
FDIC Announces Settlement with Sallie Mae for
Unfair and Deceptive Practices and Violations of
the Servicemembers Civil Relief Act (May 2014),
available at https://www.fdic.gov/news/news/press/
2014/pr14033.html; and U.S. Department of Justice,
United States v. Navient Solutions, Inc., Navient DE
Corporation and Sallie Mae Bank (May 2014),
available at https://www.justice.gov/crt/about/hce/
documents/salliecomp.pdf.
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the Bureau has also identified illegal
practices through its examination
program. Bureau examiners found one
or more student loan servicers were: 40
• Misrepresenting minimum
payments: Bureau examiners found that
one or more servicers inflated the
minimum payment that was due on
periodic statements and online account
statements. These inflated numbers
included amounts that were in
deferment and not actually due.
• Charging improper late fees: CFPB
examiners found one or more servicers
were unfairly charging late fees when
payments were received during the
grace period. Like many other types of
loans, many student loan contracts have
grace periods after the due date. If a
payment is received after the due date,
but during the grace period, the
promissory note stated that late fees
would not be charged.
• Failing to provide accurate tax
information: CFPB examiners found
cases where student loan servicers
failed to provide consumers with
information essential for deducting
student loan interest payments on their
tax filings. The servicers impeded
borrowers from accessing this
information and misrepresented
information on the consumers’ online
account statements. This practice may
have caused some consumers to lose up
to $2,500 in tax deductions.
• Misleading consumers about
bankruptcy protections: CFPB
examiners found that some servicers
told consumers student loans are not
dischargeable in bankruptcy. While
student loans are more difficult to
discharge in bankruptcy than most other
types of loans, it is possible to discharge
a student loan if the borrower
affirmatively asserts and proves ‘‘undue
hardship’’ in a court. Servicer
communications with borrowers
asserted or implied that student loans
were never dischargeable.
• Making illegal debt collection calls
to consumers at inconvenient times:
Examiners found that one or more
student loan servicers routinely made
debt collection calls to delinquent
borrowers early in the morning or late
at night. For example, examiners
identified more than 5,000 calls made at
inconvenient times during a 45-day
period, which included 48 calls made to
one consumer.
40 See Consumer Financial Protection Bureau,
Supervisory Highlights: Fall 2014 (2014), available
at https://www.consumerfinance.gov/reports/
supervisory-highlights-fall-2014.
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Presidential Memorandum on a Student
Aid Bill of Rights
On March 10, 2015, the President
signed a Presidential Memorandum
titled the ‘‘Student Aid Bill of
Rights.’’ 41 The memorandum was
addressed to the Secretary of the
Treasury, Secretary of Education,
Commissioner of Social Security,
Director of the Consumer Financial
Protection Bureau, Director of the Office
of Management and Budget, Director of
the Office of Science and Technology
Policy, and the Director of the Domestic
Policy Council. The memorandum
directed certain executive agencies to
undertake a number of steps to improve
student loan borrowers’ experience in
repayment, with a particular focus on
enhancing student loan servicing. The
memorandum requires the Secretary of
Education, in consultation with the
Secretary of the Treasury and the
Director of the Consumer Financial
Protection Bureau, to issue a report to
the President ‘‘after assessing the
potential applicability of consumer
protections in the mortgage and credit
card markets to student loans, [on]
recommendations for statutory or
regulatory changes in this area,
including, where appropriate, strong
servicing standards.’’
Policymakers Have Established a
Framework To Strengthen Servicing
Protections for Mortgage and Credit
Card Borrowers
The Bureau has observed similarities
between the servicing problems
encountered by student loan borrowers
and those experienced by borrowers
with other financial products. Loan
servicing generally includes many
common functions, irrespective of the
underlying consumer financial product,
including account maintenance, billing
and payment processing, customer
service, and managing accounts for
customers experiencing financial
distress.42
During and in the wake of the
financial crisis, Congress, state
policymakers, law enforcement officials,
and federal financial regulators sought
to address a broad range of loan
servicing problems in the credit card
41 The White House, Presidential Memorandum—
Student Aid Bill of Rights (March 10, 2015),
available at https://www.whitehouse.gov/the-pressoffice/2015/03/10/presidential-memorandumstudent-aid-bill-rights/.
42 There are also noteworthy differences between
the servicing of mortgages, credit cards and student
loans. These include but are not limited to
differences related to the servicing of loans secured
by real estate compared to unsecured loans, and
practices unique to open-ended products with
replenishing lines of credit, commonly used in
repeated transactions.
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and mortgage markets. Several large
mortgage servicers reached settlements
with State and Federal regulators to
address a range of troubling practices.43
Mortgage Servicing
Congress has passed several
significant legislative and regulatory
interventions to protect mortgage
borrowers from illegal and deceptive
mortgage servicing practices. In 1968
and 1974, Congress passed TILA and the
Real Estate Settlement Procedures Act of
1974 (RESPA), respectively. Taken
together, these statutes provide
additional disclosure requirements and
regulate certain acts associated with
consumer risk and harm.44 TILA and
RESPA also provide a private right of
action and damages in certain
circumstances for certain violations.45
Over the past nearly 50 years, Congress
has amended both TILA and RESPA on
numerous occasions to add additional
protections for consumers.46
In 2010, Congress again intervened by
providing additional protections
through the Dodd-Frank Act. The DoddFrank Act gave the Bureau authority to
promulgate regulations to implement
new mortgage servicing protections
following the wake of the financial
crisis and granted the Bureau with rulemaking, supervision, and enforcement
43 For example, in 2012, the attorneys general of
forty-nine states, the District of Columbia and the
federal government reached an agreement with five
large mortgage servicers to address mortgage loan
servicing and foreclosure abuses. See U.S.
Department of Justice, National Mortgage
Settlement, available at https://www.justice.gov/ust/
eo/public_affairs/consumer_info/nms/; In addition,
there have been a number of cases of alleged
improper treatment of military families, including
cases where mortgage servicers conducted allegedly
wrongful foreclosures in violation of the SCRA, See
U.S. Department of Justice, Recent
Accomplishments of the Housing and Civil
Enforcement Division, available at
https://www.justice.gov/crt/about/hce/whatnew.php
(summarizing the enforcement actions concerning
the Servicemember Civil Relief Act).
44 In addition to TILA and RESPA, Congress
enacted the Home Ownership and Equity Protection
Act (HOEPA) in 1994 as an amendment to TILA,
establishing certain disclosures and protections
related to high-cost mortgages. See Pub. L. 103–325.
45 15 U.S.C. 1640; 12 U.S.C. 2605.
46 See CFPB Consumer Law and Regulations,
RESPA Procedures—TILA RESPA Integrated
Disclosures (applicable for examinations after the
August 2015 effective date), and Mortgage Servicing
Requirements (January 2014), available at https://
files.consumerfinance.gov/f/
201503_cfpb_regulation-x-real-estate-settlementprocedures-act.pdf (summarizing amendments to
RESPA); See also, CFPB Consumer Law and
Regulations, TILA Procedures—TILA RESPA
Integrated Disclosures (applicable for examinations
after the August 2015 effective date), and HigherPriced Mortgage Loan Appraisals (January 2014),
Escrow Accounts (January 2014), and Mortgage
Servicing Requirements (January 2014), available at
https://files.consumerfinance.gov/f/
201503_cfpb_truth-in-lending-act.pdf (summarizing
amendments to TILA).
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authority over covered financial
institutions.47 The Bureau implemented
a series of new rules to significantly
improve consumer protections for
mortgage borrowers.48 The rules address
critical servicer practices including
error resolution, prompt crediting of
payments, and providing payoff
statements. They also include
requirements relating to servicer
policies and procedures, early
intervention for delinquent borrowers,
continuity of contact, and procedures
for evaluating and responding to loss
mitigation applications. These rules
protect consumers from detrimental
actions by mortgage servicers and give
consumers better tools and information
when dealing with mortgage servicers.
For example, the mortgage servicing
rules include:
• Notice of transfer of loan servicing.
If a lender or servicer transfers a loan’s
servicing to a new servicer, the prior
servicer must provide a notice to the
borrower no less than 15 days before the
effective date of transfer, and the
transferee servicer must provide a notice
not more than 15 days after the effective
date of transfer, with limited
exceptions.49 In addition, during the 60day period beginning on the effective
date of transfer, the servicer cannot treat
a consumer’s payment as late for any
purpose (and cannot charge a late fee)
if the consumer has made a timely
payment to the prior servicer.50
• Timely transfer of documents to
new servicer. Mortgage servicers are
required to maintain policies and
procedures reasonably designed to
facilitate the transfer of information
during servicing transfers.51 These
policies should be tailored to ensure
timely transfer of all documents and
information in the possession or control
of the prior servicer relating to the
transferred loan to the new servicer.
• Payoff statements. A servicer must
provide a payoff statement, specifying
47 Public
Law 111–203.
CFPB Consumer Law and Regulations,
RESPA Procedures—TILA RESPA Integrated
Disclosures (applicable for examinations after the
August 2015 effective date), and Mortgage Servicing
Requirements (January 2014), available at https://
files.consumerfinance.gov/f/
201503_cfpb_regulation-x-real-estate-settlementprocedures-act.pdf (summarizing amendments to
RESPA); see also, CFPB Consumer Law and
Regulations, TILA Procedures—TILA RESPA
Integrated Disclosures (applicable for examinations
after the August 2015 effective date), and HigherPriced Mortgage Loan Appraisals (January 2014),
Escrow Accounts (January 2014), and Mortgage
Servicing Requirements (January 2014), available at
https://files.consumerfinance.gov/f/
201503_cfpb_truth-in-lending-act.pdf (summarizing
amendments to TILA).
49 12 CFR 1024.33(b).
50 12 CFR 1024.33(c).
51 12 CFR 1024.38(a), (b)(4).
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48 See
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the amount needed to pay the loan in
full as of a particular date, within seven
business days after receiving the
consumer’s written request.52
• Error resolution procedures.
Generally, mortgage servicers must
respond to written notices from
consumers asserting a servicing error,
such as charges for late fees that the
servicer lacks a reasonable basis to
impose.53 Within five days of a
mortgage servicer receiving a written
notice of error, the servicer must
provide a timely written response
acknowledging receipt.54 Then the
servicer must correct the error or
conduct a reasonable investigation and
provide a written notice that the error
has been corrected or conduct a
reasonable investigation and provide the
borrower a written notification that no
error has occurred, along with the
rationale behind the determination, and
a statement of the borrower’s right to
request documents relied upon by the
servicer and information on how to
request such documents.55
• Continuity of contact. Mortgage
servicers must maintain policies and
procedures designed to assign
designated personnel to respond to the
consumer’s inquiries, and, as
applicable, assist the consumer with
available loss mitigation options.56 This
gives the delinquent consumers
continuity of contact and the ability to
access information about the mortgage
without being transferred to multiple
customer service representatives.
• Record retention. Mortgage
servicers are required to retain certain
records that document actions taken
regarding the mortgage loan account
until one year after the date the loan is
discharged or servicing is transferred.57
Records required to be preserved
include a schedule of all transactions
debited or credited, any notes created by
the servicer reflecting communications
with the borrowers about the mortgage,
and copies of any documents provided
by the consumer to the servicer in
accordance with error resolution or loss
mitigation procedures.58
• Early intervention for delinquent
borrowers. Mortgage servicers must
make a good faith effort to establish live
contact with a borrower no later than
the 36th day of a borrower’s
delinquency.59 No later than the 45th
day of delinquency, a servicer must
52 12
CFR 1026.36(c)(3).
CFR 1024.35(a), (b).
54 12 CFR 1024.35(d).
55 12 CFR 1024.35(e).
56 12 CFR 1024.40(a).
57 12 CFR 1024.38(c)(1).
58 12 CFR 1024.38(c)(2).
59 12 CFR 1024.39(a).
53 12
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provide a written early intervention
notice.60
Credit Cards
In 2009, Congress enacted the Credit
Card Accountability, Responsibility,
and Disclosure Act (CARD Act),
establishing new protections for
consumers with credit cards.61 The
CARD Act included a number of
changes to credit card servicing and
payment processing practices. For
example, these changes include:
• Timely posting of payments. Credit
card companies must credit all
payments received by 5 p.m. on the day
they are received.62 If they are received
by 5 p.m. on the due date, payments are
generally considered to be on-time.
• Periodic billing statements. Credit
card companies must have reasonable
procedures designed to ensure that
billing statements are mailed or
delivered at least 21 days before a
payment is due.63 In addition, credit
card companies must disclose on the
billing statement how long it would take
the consumer, including how much it
would cost, to pay the full balance on
the card by paying only the required
minimum payments.64 The statement
must also disclose the monthly payment
required to repay the full balance in
three years, and the resulting total cost
to the consumer, assuming no
additional transactions.65
• Application of Payments. Credit
card companies, upon receipt of a
payment in excess of the minimum
payment amount due, must first apply
the excess to the card balance bearing
the highest interest rate, and then to
each successive balance bearing the next
highest rate of interest, until the
payment is exhausted.66
Part B: Questions Related to Student
Loan Servicing
The Bureau is interested in responses
in the following general areas, as well as
the specific questions below. Part A of
this Request for Information (RFI)
provides a general overview of the
problems experienced by consumers
when repaying student debt.
In the following section, we offer
commenters a series of questions to
consider when responding to this RFI.
60 12
CFR 1024.39(b).
L. 111–24. Consumers with credit cards
had a number of servicing protections in place
under TILA prior to the enactment of the CARD
Act, including those related to error resolution,
limits on liability and periodic statements.
62 15 U.S.C. 1666c(a).
63 15 U.S.C. 1666b(a).
64 15 U.S.C. 1637(b)(11)(B)(i) and (ii).
65 15 U.S.C. 1637(b)(11)(B)(iii).
66 15 U.S.C. 1666c(b)(1).
61 Pub.
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Responses may include answers to the
following categories of questions. Part
One of this section solicits feedback on
questions related to general practices in
the student loan servicing industry,
including industry practices for
borrowers in distress. Part Two seeks
comments on the applicability of
consumer protections from other
consumer financial product markets,
including the markets for servicing
credit cards and mortgages. Part Three
solicits feedback on the availability of
data about student loan performance
and borrower characteristics during
repayment. Respondents are encouraged
to provide responses to any of the broad
categories of questions outlined below.
Part One: General Questions on
Common Industry Practices Related to
Student Loan Repayment
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The following section seeks to solicit
input on common practices, policies,
and procedures in the student loan
servicing market. Respondents may
wish to address any structural features
of the student loan servicing market as
they relate to specific practices,
including but not limited to:
• The traditional compensation
model for third-party student loan
servicing, including compensation
related to default aversion and
alternative repayment options;
• Information systems used by
student loan servicers, including
information systems used to process
alternative repayment options, servicing
transfers, and furnishing of credit
information; or
• Existing federal and state statutory
or regulatory protections for student
loan borrowers in repayment.
Respondents may also wish to
highlight effective or innovative
approaches to delivering service,
including:
• Practices by incumbents or new
entrants in the student loan servicing
market;
• Practices by loan servicers in other
markets, including but not limited to
servicing practices for credit cards and
mortgages; or
• Alternative business models to
traditional loan servicing that could
reduce costs, increase recoveries, or
enhance transparency for borrowers.
Practices Related to Student Loan
Repayment
(1) Please describe the extent to which
issues related to the following common
student loan servicing policies and
procedures should inform policymakers
and market participants considering
options to improve the quality of
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student loan servicing, including but
not limited to:
a. Processing, allocation, and
application of payments (including
partial payments and prepayments);
b. The imposition and disclosure of
late fees, including the impact of late
fees across billing groups;
c. Transfer of loans between lenders,
loan holders, and student loan servicers;
d. The complaint resolution process
(including the consumers’ ability to
adequately request and receive accurate
and timely responses for information
and corrections related to their account);
e. Furnishing of credit information to
credit reporting agencies (including the
appropriateness, adequacy, and
accuracy of the information furnished);
f. The impact of a single late payment
on borrowers’ future abilities to avail
themselves of repayment benefits, such
as interest rate reductions for enrolling
in auto-debit;
g. Disclosure, accessibility, and
availability of refinance products;
h. Disclosure, accessibility, and
availability of options to release a cosigner from their legal obligation to
repay a co-signed student loan; or
i. Disclosure, accessibility, and
availability of options to discharge or
reduce student loan debt in the event of
the death or disability of a borrower or
co-signer.
Practices Related to Student Loan
Repayment for Borrowers in Distress
(2) Please describe the extent to which
issues related to the following common
student loan servicing policies and
procedures should inform policymakers
and market participants considering
options to improve the quality of
student loan servicing for borrowers in
distress, including but not limited to:
a. Procedures servicers utilize to
ensure that borrowers can avail
themselves of alternative repayment
options;
b. The circumstances in which a fee
occurs or should be permissible, and the
manner of disclosure of servicingrelated fees, including those imposed
for modifications or cessation of
payment (e.g. forbearance or deferment);
c. The offering and disclosure of
variable rate private loans that increase
the interest rate based on borrower
behavior, including missed payments;
d. Policies and procedures related to
acceleration of debts (including the
availability and disclosures of co-signer
release policies);
e. Disclosure, accessibility, and
availability of affordable modification
options; or
f. The adequacy and clarity of
communication regarding certain
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borrower rights to discharge debt (e.g.,
in cases of school misconduct, borrower
disability).
Impact of Practices Related to Student
Loan Repayment for Borrower Segments
With Unique Characteristics
(3) Please identify any unique issues
that are specific to certain segments of
the student loan borrower population
related to the common student loan
servicing practices, operations, policies,
and procedures described above.
Responses should consider borrower
segments with unique characteristics,
including but not limited to
servicemembers, veterans, and their
families; first-generation college
attendees; current or former attendees of
Historically Black Colleges and
Universities (HBCU) or MinorityServicing Institutions (MSI); and older
Americans.
Part Two: Applicability of Consumer
Protections From Other Consumer
Financial Product Markets
Respondents may wish to evaluate
existing loan servicing protections for
consumers in other markets, including
protections for consumers with
mortgages and credit cards. The
following questions seek to solicit
feedback on any conduct requirements
required by statute, regulation, consent
decree or other means that should
inform policymakers and market
participants when considering options
to improve the quality of student loan
servicing. Respondents may wish to
consider aspects of loan servicing in
these markets that are common across
products and may also wish to note
differences between types of loan
servicing that may make the delivery of
service unique to a particular market.
Responses need not address all
questions in this section and need not
be limited to the specific provisions
identified below.
Requirements Related to Mortgage
Servicing Practices
(4) Describe any mortgage servicing
standards or other provisions under
RESPA, TILA or the Home Ownership
and Equity Protection Act (HOEPA) that
should inform policymakers and market
participants considering options to
improve the quality of student loan
servicing. Responses need not be
limited to requirements related to:
a. Payment handling. Specific
conduct requirements for mortgage
servicers related to payment handling,
including payoff requests or prompt
crediting of payments, and to periodic
statements, including the timing of
periodic statements or specific periodic
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statement disclosures for delinquent
borrowers.
b. Servicing transfers. Specific
conduct requirements for mortgage
servicers in the event of a servicing
transfer, including requirements related
to the timing of notices in the event of
a transfer of servicing, record retention
requirements for the transferor servicer,
or prohibitions against certain late fees
and treating certain payments as late for
a fixed period following the transfer of
servicing.
c. Error resolution. Specific conduct
requirements for mortgage servicers
related to error resolution and requests
for information, including notices
required upon receipt of a written notice
of error or request for information,
requirements related to investigations
and error resolution, requirements
related to the production of requested
information, and notices required if
requested information is not available.
d. Interest rate adjustment
notifications. Specific conduct
requirements for mortgage servicers
related to interest rate adjustment
notifications, including notice of
interest rate adjustment prior to the first
payment at a new rate and notice of rate
adjustment prior to the first payment
due after the rate adjusts, if payment
will change.
e. Loan counseling. Specific conduct
requirements for creditors related to
homeownership counseling, including
the timely provision of information
about homeownership counseling
organizations or requirements related to
the confirmation of consumer’s
completion of homeownership
counseling prior to making a loan that
permits negative amortization to a firsttime borrower.
Requirements Related to Mortgage
Servicing for Borrowers in Distress
(5) Describe any mortgage servicing
standards or other provisions under
RESPA, TILA, or HOEPA that should
inform policymakers and market
participants considering options to
improve the quality of student loan
servicing for distressed borrowers.
Responses need not be limited to
specific conduct related to:
a. Live contact. Specific conduct
requirements for mortgage servicers
related to outreach to delinquent
borrowers, including the requirement
for mortgage servicers to establish or
make good faith efforts to establish live
contact with borrower early in
borrowers’ delinquency.
b. Loss mitigation information.
Specific conduct requirements for
mortgage servicers related to the
disclosure of loss mitigation options,
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including the requirement for mortgage
servicers to maintain policies and
procedures reasonably designed to
ensure that servicer personnel assigned
to a delinquent borrower provide the
borrower with accurate information
about loss mitigation options and
actions the borrower must take to be
evaluated for such loss mitigation
options.
c. Timing requirements for foreclosure
filings. Specific conduct requirements
for mortgage servicers related to timing
for foreclosure filings, including the
specific prohibition on mortgage
servicers from making the first notice or
filing required by applicable law for any
judicial or non-judicial foreclosure
process until after a borrower becomes
delinquent for a certain period of time.
Respondents may wish to contrast these
requirements with conduct
requirements in place related to
servicing student loans in late-stage
delinquency.
d. Assignment of continuity of contact
personnel. Specific conduct
requirements for mortgage servicers
related to ensuring borrowers can access
customer service personnel, including
the requirement for mortgage servicers
to maintain policies and procedures
reasonably designed to achieve the
objective of assigning continuity of
contact personnel (which can be one or
a team of personnel) to a delinquent
borrower who will be available via
telephone, and will provide a live
response to a borrower immediately or
in a timely manner.
e. Conduct by continuity of contact
personnel. Specific conduct
requirements for mortgage servicers
related to customer service provided by
continuity of conduct personnel,
including the requirement for mortgage
servicers to have reasonable policies
and procedures reasonably designed to
ensure that assigned continuity of
contact personnel retrieve in a timely
manner written information the
borrower provided to the servicer (or
prior servicers) in connection with a
loss mitigation application and provide
such information to other persons
required to evaluate a borrower for loss
mitigation options made available by
the servicer, if applicable.
f. Prohibition on recommending
default. Specific conduct requirements
for creditors related to conditions under
which a creditor can recommend
refinancing of a high-cost mortgage,
including a prohibition on
recommending default on an existing
loan.
g. Prohibition on certain fees. Specific
conduct requirements for creditors
related to fees charged to borrowers,
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29311
including the requirement that
creditors, servicers and assignees cannot
charge a fee to modify, defer, renew,
extend, or amend a high-cost mortgage,
the restriction of late fees to four percent
of the past due payment and rules for
imposing late fees when a consumer
resumes making payments after missing
one or more payments, or the limitation
on the imposition of fees for payoff.
Requirements Related to Servicing
Practices in the Credit Card Market
(6) Describe any protections afforded
to consumers with credit cards,
including but not limited to protections
under the Credit CARD Act of 2009 (15
U.S.C. 1637), to inform policymakers
and market participants considering
options to improve the quality of
student loan servicing. Responses
should consider, but should not be
limited to:
a. Notice of rate increases and
significant changes. Specific conduct
requirements for card issuers related to
written notice of an increase in an
annual percentage rate or any other
significant change, including the
requirement that such notice be sent 45
days prior to the effective date of the
rate increase or change.
b. Notice of certain penalties for late
payments. Specific conduct
requirements for card issuers related to
written notices required in response to
borrowers’ failure to make a minimum
payment within 60 days of the due date,
including the notice requirement
triggered when a card issuer increases
the APR or fees.
c. Timing of periodic statements.
Specific conduct requirements for card
issuers related to the timing of periodic
statements, including the requirement
that a creditor may not treat a payment
on an open-end consumer credit plan as
late for any purpose, unless the creditor
has adopted reasonable procedures
designed to ensure that each periodic
statement is mailed or delivered to the
consumer no later than 21 days before
the payment due date.
d. Posting of payments. Specific
conduct requirements for card issuers
related to the posting of payments,
including the requirement that credit
card companies credit or treat as on
time all payments received by 5 p.m. on
the day they are received.
e. Fees for processing payments.
Specific conduct requirements for card
issuers related to fees for processing
payments, including the requirement
that a creditor may not impose a
separate fee to allow the borrower to
repay an extension of credit or finance
charge, such as a fee for processing a
payment, unless such payment involves
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an expedited service by a service
representative of the creditor.
f. Application of payments. Specific
conduct requirements for card issuers
related to the application of payments,
including the requirement that credit
card companies upon receipt of a
payment in excess of the minimum
payment amount due, must first apply
the excess to the card balance bearing
the highest interest rate, and then to
each successive balance bearing the next
highest rate of interest, until the
payment is exhausted.
g. Limitations on changes to fees,
charges and annual percentage rates.
Specific conduct requirements for card
issuers related to certain changes to
terms, including the requirement that a
card issuer may not elect to increase the
annual percentage rate or assess fees or
other charges, with some exceptions.
h. Disclosures related to payments
and interest charges. Specific conduct
requirements for card issuers related to
disclosures about payment application
and interest charges, including the
requirement that credit card issuer
provide disclosures on consumers’
periodic statements warning them that if
they make only minimum payments on
their accounts, they will pay more in
interest, and it will take longer to pay
off their account balance.
i. Online publication of certain
documents. Specific conduct
requirements for card issuers related to
the publication of certain documents
online, including the requirement for a
creditor to establish and maintain an
Internet site and post the written
agreement between the creditor and the
consumer for each credit card account
under an open-end consumer credit
plan and that the creditor provide in
electronic format the credit card
agreement on the creditor’s Web site.
Other Requirements Related to Loan
Servicing
(7) To what extent should the specific
conduct requirements included in
settlements between financing services
providers and state law enforcement
agencies inform policymakers and
market participants considering options
to improve the quality of student loan
servicing? Respondents may wish to
address, but need not be limited to,
specific requirements contained in the
National Mortgage Settlement (NMS),
including protections related to
members of the military and their
families.
(8) Describe any other standards of
conduct required by statute, regulation,
consent decree or other means that
should inform policymakers and market
participants when considering options
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to improve the quality of student loan
servicing, including but not limited to,
provisions related to:
a. Payment handling and allocations;
b. Periodic statement requirements;
c. Disclosures required on periodic
statements;
d. Servicing transfers;
e. Dispute resolution procedures;
f. Request for information;
g. Interest rate adjustment
notifications;
h. The imposition of fees;
i. Imposition of interest rate penalties
in response to changes in customer
behavior;
j. The availability and accessibility of
affordable repayment options; or
k. The ability for a lender to place a
borrower or co-signer in default based
on consumer behavior other than
missed payments.
(9) Describe the extent to which the
existing statutory or regulatory
protections afforded to consumers under
the following laws should inform
policymakers and market participants
considering options to improve the
quality of student loan servicing:
a. Truth in Lending Act;
b. Real Estate Settlement Procedures
Act;
c. Fair Credit Reporting Act;
d. Fair Debt Collection Practices Act;
e. Electronic Funds Transfer Act;
f. Higher Education Act; or
g. Federal Trade Commission Act.
Part Three: Impact of Limits on
Availability of Data About Student Loan
Servicing and Student Loan Repayment
on Borrowers
The following section seeks to solicit
input about the availability of data on
student loan performance and on
borrower characteristics during
repayment. Respondents should
consider existing data sources and gaps
in availability that should inform
policymakers and market participants
considering options to improve the
quality of student loan servicing.
(10) To what extent do available data
and reports about student loan
repayment reveal usage and specific
risks to student loan borrowers,
including those related to:
a. Loan performance, delinquency,
and default;
b. Utilization of income-driven
payment plans and other alternative
repayment options; or
c. Utilization of repayment options
that result in temporary cessation of
payment, including deferment and
forbearance.
(11) To what extent do gaps in
available data create problems for
policymakers or other stakeholders
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seeking to evaluate consumer risks as it
relates to student loan servicing?
(12) To what extent are publicly
available data sets in other consumer
financial markets (e.g., the Bureau’s
Home Mortgage Disclosure Act
microdata, the OCC’s monthly mortgage
metrics, and the Bureau’s Credit Card
Agreement Database) instructive as
policymakers consider ways to better
afford the public and regulators the
ability monitor trends in the market and
assess consumer risks?
Authority: 12 U.S.C. 5511(c).
Dated: May 15, 2015.
Christopher D’Angelo,
Chief of Staff, Bureau of Consumer Financial
Protection.
[FR Doc. 2015–12276 Filed 5–20–15; 8:45 am]
BILLING CODE 4810–25–P
DEPARTMENT OF DEFENSE
Office of the Secretary
[Docket ID: DoD–2015–OS–0052]
Privacy Act of 1974; System of
Records
Office of the Secretary of
Defense, DoD.
ACTION: Notice to alter a System of
Records.
AGENCY:
The Office of the Secretary of
Defense proposes to alter a system of
records, DWHS E02, entitled ‘‘Freedom
of Information Act Case Files’’ in its
inventory of record systems subject to
the Privacy Act of 1974, as amended.
Information is being collected and
maintained in this system for the
purpose of processing FOIA requests
and administrative appeals; for
participating in litigation regarding
agency action on such requests and
appeals; and for assisting the DoD in
carrying out any other responsibilities
under FOIA.
DATES: Comments will be accepted on or
before June 22, 2015. This proposed
action will be effective the date
following the end of the comment
period unless comments are received
which result in a contrary
determination.
SUMMARY:
You may submit comments,
identified by docket number and title,
by any of the following methods:
* Federal Rulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
* Mail: Department of Defense, Office
of the Deputy Chief Management
Officer, Directorate of Oversight and
Compliance, Regulatory and Audit
ADDRESSES:
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[Federal Register Volume 80, Number 98 (Thursday, May 21, 2015)]
[Notices]
[Pages 29302-29312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12276]
=======================================================================
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BUREAU OF CONSUMER FINANCIAL PROTECTION
[Docket No. CFPB-2015-0021]
Request for Information Regarding Student Loan Servicing
AGENCY: Bureau of Consumer Financial Protection.
[[Page 29303]]
ACTION: Notice and request for information.
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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB)
is seeking comments from the public related to the market for student
loan servicing. The submissions to this request for information will
serve to assist market participants and policymakers on potential
options to improve borrower service, reduce defaults, develop best
practices, assess consumer protections, and spur innovation.
DATES: Comments must be received on or before July 13, 2015.
ADDRESSES: You may submit comments, identified by Docket No. CFPB-2015-
0021, by any of the following methods:
Electronic: https://www.regulations.gov. Follow the
instructions for submitting comments.
Email: FederalRegisterComments@cfpb.gov. Include Docket
No. CFPB-2015-0021 in the subject line of the message.
Mail: Monica Jackson, Office of the Executive Secretary,
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC
20552.
Hand Delivery/Courier: Monica Jackson, Office of the
Executive Secretary, Consumer Financial Protection Bureau, 1275 First
Street NE., Washington, DC 20002.
Instructions: All submissions should include the agency name and
docket number for this proposal. Because paper mail in the Washington,
DC area and at the Bureau is subject to delay, commenters are
encouraged to submit comments electronically. In general, all comments
received will be posted without change to https://www.regulations.gov.
In addition, comments will be available for public inspection and
copying at 1275 First Street NE., Washington, DC 20002, on official
business days between the hours of 10 a.m. and 5 p.m. eastern standard
time. You can make an appointment to inspect the documents by
telephoning (202) 435-7275.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or social
security numbers, should not be included. Comments generally will not
be edited to remove any identifying or contact information.
FOR FURTHER INFORMATION CONTACT: For general inquiries, submission
process questions or any additional information, please contact Monica
Jackson, Office of the Executive Secretary, at 202-435-7275.
SUPPLEMENTARY INFORMATION: The Consumer Financial Protection Bureau is
engaged in a joint effort with the U.S. Department of Education and the
U.S. Department of the Treasury to identify initiatives to strengthen
student loan servicing. This request seeks comments related to the
critical role that servicing plays in facilitating repayment of student
loans, in order to improve customer service, identify innovative
practices and business models, and assess the current framework that
exists regarding the consumer protection for student loan borrowers in
repayment.
The submissions to this request for information may serve to assist
federal and state agencies in prioritizing resources and to assist
financial services providers in developing best practices. The public
comments may also be used to inform a report required by a Presidential
Memorandum signed on March 10, 2015.\1\
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\1\ The White House, Presidential Memorandum--Student Aid Bill
of Rights (March 10, 2015), available at https://www.whitehouse.gov/the-press-office/2015/03/10/presidential-memorandum-student-aid-bill-rights.
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The deadline for submission of comments is July 13, 2015.
The Bureau encourages comments from the public, including:
Student loan borrowers;
Organizations representing students and student loan
borrowers;
Innovators, technology providers, and recent entrants into
the student loan market;
Institutions of higher education and affiliated parties;
Financing services providers, including but not limited to
lenders and servicers in the mortgage, credit card, and student loan
markets;
Trust administrators of student loan asset-backed
securities;
Credit reporting agencies;
Debt collectors;
Organizations promoting financial education;
Civil rights groups; and
Nationally recognized statistical rating organizations.
Please note that the Bureau is not soliciting individual student
account information in response to this notice and request for
information, nor is the Bureau seeking personally identifiable
information (PII) regarding student accounts from the parties or any
third party.
All comments, including attachments and other supporting materials,
will become part of the public record and subject to public disclosure.
Sensitive personal information, such as account numbers or social
security numbers, should not be included. Comments generally will not
be edited to remove any identifying or contact information.
Part A: Issues Related to Student Loan Repayment
The Student Loan Market
In the last decade, the student loan market has undergone rapid
growth and change. Today, the Consumer Financial Protection Bureau (the
Bureau) estimates that there are over 40 million borrowers with student
loans who collectively owe over $1.2 trillion.\2\ Student debt is the
largest category of unsecured debt owed by American consumers.
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\2\ U.S. Department of Education, Federal Student Aid Portfolio
Summary, Data Center: Federal Student Loan Portfolio, accessed on 3/
30/2015, available at https://studentaid.ed.gov/about/data-center/student/portfolio; Consumer Financial Protection Bureau and U.S.
Department of Education, Private Student Loans (2012), available at
https://www.consumerfinance.gov/reports/private-student-loans-report/
; and U.S. Department of Education, Federal Student Aid Annual
Report 2014 (2014), available at https://www2.ed.gov/about/reports/annual/2014report/fsa-report.pdf.
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Compared to other large markets of consumer financial products
(such as residential mortgages and credit cards),\3\ availability of
market data is quite limited, particularly for private student loans,
which grew rapidly in the years leading up to the financial crisis.\4\
Based on the Bureau's analysis of various sources, such as consumer
credit panels, audited financial statements, and consumer surveys, both
the number and proportion of student loan borrowers in a repayment
status has grown.
---------------------------------------------------------------------------
\3\ For example, under the Home Mortgage Disclosure Act, most
loan-level mortgage application, origination, and purchase data is
currently subject to public disclosure, stripped of certain
information to protect borrower privacy. The CFPB developed and
maintains a web tool to allow the public to access and analyze HMDA
data. See Consumer Financial Protection Bureau, The Home Mortgage
Disclosure Act, available at https://www.consumerfinance.gov/hmda. In
addition, data from housing GSEs and mortgage-backed securities
filings shed significant light on loan-level performance. The Office
of the Comptroller of the Currency regularly publishes a mortgage
metrics report, detailing loan modification performance and other
key servicing data. See, for example, Office of the Comptroller of
the Currency, Mortgage Metrics Report for 2014 Q4 (March 2015),
available at https://www.occ.gov/publications/publications-by-type/other-publications-reports/mortgage-metrics/mortgage-metrics-q4-2014.pdf.
\4\ Consumer Financial Protection Bureau and U.S. Department of
Education, Private Student Loans (2012), available at https://www.consumerfinance.gov/reports/private-student-loans-report/.
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[[Page 29304]]
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While the features and borrower characteristics of each type of
student loan may vary, the three major types of student loans currently
outstanding, as described below, are generally serviced by the same
market participants.
The three main types of post-secondary education loans under which
borrowers have outstanding balances are loans made under the Federal
Family Education Loan program (FFELP), loans made under the William D.
Ford Federal Direct Loan (Direct Loan) program, and private student
loans. Direct Loans and private student loans are still available for
new originations.\6\
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\5\ U.S. Department of Education, Federal Student Aid Annual
Report (2007-2014), available at https://www2.ed.gov/about/reports/annual/.
\6\ There are additional Federal programs under Title IV which
also authorize student loans. For example, one such program finances
loans made directly by certain post-secondary education institutions
through their financial aid offices. See 20 U.S.C. 1087aa et seq.
Another offers grants to those who pledge to become teachers. If the
recipients do not become teachers, then the disbursed funds are
converted from grants to loans. See 20 U.S.C. 1070g et seq.
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Federal Family Education Loans: More than $380 billion \7\ in
outstanding student loans were made under FFELP.\8\ While FFELP loans
were generally originated using private capital, they were guaranteed
by a governmental or not-for-profit entity, and reinsured by the
Federal government. These loans are serviced either by the loan holders
themselves or by a third-party student loan servicer pursuant to
contracts with the loan holders. A noteworthy portion of these loans
serve as collateral for asset-backed securities.\9\ Pursuant to the
2010 SAFRA Act, the origination of new guaranteed loans under FFELP was
suspended.
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\7\ U.S. Department of Education, Federal Student Aid Portfolio
Summary, Data Center: Federal Student Loan Portfolio, accessed on 5/
6/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio.
\8\ 20 U.S.C. 1078(b), (c).
\9\ See, for example, Sallie Mae, SLM Corporation: Overview of
FFELP and FFELP ABS Transactions (June 18, 2012), available at
https://www.navient.com/assets/about/investors/webcasts/2012FFELPOverviewvFinal.pdf.
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Federal Direct Loans: Pursuant to SAFRA, the Department of
Education shifted primarily to direct lending, providing loans directly
to borrowers under the William D. Ford Federal Direct Loan program.\10\
As of the end of calendar year 2014, 28.5 million borrowers
collectively owed approximately $744 billion in outstanding Direct
Loans.\11\ Direct Loans are serviced by third parties that contract
with the Department of Education pursuant to Title IV of the Higher
Education Act (HEA).\12\ Preceding the suspension of new FFELP
originations, many of the FFELP student loan servicers were awarded
servicing contracts to begin servicing loans held by the Department of
Education, including loans made under the Direct Loan program.\13\
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\10\ See Public Law 111-152, secs. 2101-2213, 124 Stat. 1071
(2010). The Direct Loan Program actually began in 1992, see Public
Law 102-325, 106 Stat. 569 (1992), but Federal Direct loans
constituted only a small portion of Federal student lending before
the enactment of the SAFRA Act in 2010.
\11\ U.S. Department of Education, Federal Student Aid Portfolio
Summary, Data Center: Federal Student Loan Portfolio, accessed on 5/
7/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio.
\12\ 20 U.S.C. 1087f(b).
\13\ In 2008, the enactment of the Ensuring Continued Access to
Student Loans Act (ECASLA) authorized the Secretary of Education to
take extraordinary measures to ensure students could continue to
borrow amid turmoil in the capital markets. Under this authority,
the Department of Education acquired a large volume of loans made by
private lenders through FFELP and assigning the servicing to certain
third parties. See Pub. L. 110-227; following the termination of the
FFEL program, third-party servicers were awarded additional Direct
Loan volume through this contract. For further discussion, see U.S.
Department of Education, Loan Servicing Update (July 2012) available
at www.ifap.ed.gov/presentations/attachments/NASFAA2012LoanServicingUpdate.ppt.
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Private Student Loans: The student loan market includes private
student loans, which are not originated pursuant to Title IV of the
HEA. Most private student loans are typically originated by very large
depository institutions and specialty student loan companies. A
substantial portion of private student loans serve as collateral for
asset-backed securities. The market for private student loans is
opaque, as market participants generally do not make available key
origination and performance information, and reporting requirements on
outstanding balances and performance are extremely limited.
The vast majority of student loan servicing activity is now
concentrated among large student loan servicers that service all three
types of student loans.\14\
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\14\ For further discussion of student loan servicing market
composition, see Consumer Financial Protection Bureau, Final Rule:
Defining Larger Participants of the Student Loan Servicing Market
(December 2013), available at https://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf.
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The Student Loan Servicing Business Model
More than 40 million Americans with student loan debt depend on
student loan servicers as their primary point of contact for their
student loans. A servicer is often different than the lender or loan
holder, and borrowers almost always lack control or choice over which
company services their loan. Student loan servicers' duties typically
include managing borrowers' accounts, processing monthly payments, and
communicating directly with borrowers.\15\ These duties may also
[[Page 29305]]
include informing borrowers about loan repayment options and
facilitating enrollment in alternative repayment plans and other
benefits, including options to assist federal student loan borrowers
experiencing financial hardship.\16\
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\15\ The Bureau defined student loan servicing as (1) receiving
loan payments (or receiving notification of payments) and applying
payments to the borrower's account pursuant to the terms of the
post-secondary education loan or of the contract governing the
servicing; (2) during periods when no payments are required,
maintaining account records and communicating with borrowers on
behalf of loan holders; or (3) interactions with borrowers,
including activities to help prevent default, conducted to
facilitate the foregoing activities. See 12 CFR 1090.106.
\16\ See, for example, 20 U.S.C. 1098e.
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When problems arise because of servicing problems, student loan
borrowers may face a range of different consequences. They may miss a
payment, owe more money because of additional interest on principal, or
face future difficulties with credit because of a poor payment history.
For the majority of student loan borrowers who make payments on
time each month and never contact their servicer for additional
assistance, loan servicing generally may be limited to accepting and
applying monthly payments and awarding benefits earned by satisfying
specific loan terms (e.g. interest rate reductions for enrolling in
auto-debit or making a series of on-time monthly payments). These
borrowers also depend on their student loan servicers to accurately
report their payment history to the credit bureaus. Adequate student
loan servicing is critical for these borrowers to establish a good
credit history through their timely student loan payments, in order to
ensure that they are positioned to participate fully in the marketplace
for other financial products and services.\17\
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\17\ In addition, certain consumer protections included in Title
IV of the Higher Education Act require student loan borrowers to
remit on-time monthly payments under certain repayment arrangements
in order to obtain loan forgiveness. These repayment arrangements
may require student loan servicers to certify income documentation
on an annual basis in order for borrowers to obtain the maximum
benefit. In some cases, loan forgiveness is also contingent upon
certain types of employment. Student loan servicers are responsible
for evaluating the timeliness of monthly payments, evaluating
whether employment qualifies a borrower for certain benefits and
applying these benefits to borrowers' accounts. Depending on the
program, high-quality student loan servicing over a period of 5, 10,
20 or 25 years is critical for these borrowers to realize benefits
provided by statute. See, for example, 20 U.S.C. 1078-10 and 20
U.S.C. 1087e(m).
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Student loan borrowers facing unemployment or other financial
hardship need adequate loan servicing for a different reason. Student
loan servicers assist these borrowers with enrolling in alternative
repayment plans, obtaining deferments or forbearances, or requesting a
modification of loan terms. For these borrowers, proper loan servicing
may be the key to successfully avoid default and ultimately perform on
the loan. When borrowers face difficulties, loan servicers can help
borrowers avoid default, minimize damage to borrowers' credit, and
ensure that borrowers can find sustainable solutions that keep them on
a long-term path to future financial success. In addition, adequate
loan servicing also helps to ensure that owners of the loans are
repaid.
Financial Incentives for Student Loan Servicers
The Bureau estimates that there are nearly 8 million student loan
borrowers in default, representing over $110 billion in balances.\18\
In addition, the Department of Education estimates that another 3
million Direct Loan borrowers are at least 30 days past due on one or
more student loans, comprising over $58 billion in balances.\19\ As the
number of borrowers with defaulted or delinquent student loans has
grown,\20\ it has prompted questions about what steps servicers should
take to achieve greater success in minimizing defaults and curing
delinquencies. For example, it appears that few, if any, private
student lenders and loan servicers have developed transparent, widely-
offered flexible repayment options to mitigate defaults for borrowers
in distress.\21\
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\18\ As of the first quarter of FY15, 7.3 million federal
student loan borrowers were in default on more than $106 billion in
federal student loans. See, U.S. Department of Education, Federal
Student Aid Portfolio Summary, Data Center: Federal Student Loan
Portfolio, accessed on 5/7/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio; According to
a 2012 study of the private student loan market published by the
U.S. Department of Education and the Consumer Financial Protection
Bureau, 850,000 private student loans with an outstanding principal
balance of over $8 billion were in default. See U.S. Department of
Education and Consumer Financial Protection Bureau, Private Student
Loans (2012), available at https://www.consumerfinance.gov/reports/private-student-loans-report/.
\19\ U.S. Department of Education, Federal Student Aid Portfolio
Summary, Data Center: Federal Student Loan Portfolio, accessed on 3/
30/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio.
\20\ Consumer Financial Protection Bureau, A closer look at the
trillion (August 5, 2013), available at https://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/.
\21\ Consumer Financial Protection Bureau, Annual Report of the
CFPB Student Loan Ombudsman (2014), available at https://files.consumerfinance.gov/f/201410_cfpb_report_annual-report-of-the-student-loan-ombudsman.pdf.
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While federal student loans feature an array of flexible repayment
options, it is not clear whether third-party student loan servicers,
particularly those servicing Federal Family Education Loans, have
adequate economic incentive to enroll borrowers in these options to
avoid default. For both private and federal student loans, the
compensation model used in most third-party servicing contracts
provides student loan servicers with a flat monthly fee per account
serviced.\22\ Although this fee may adjust based on a loan's repayment
status, fees are generally fixed on a monthly basis and do not rise or
fall depending on the level of service a particular borrower requires
in a given month.
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\22\ This monthly servicing fee may be set as a flat dollar
amount per month per account, or set based on a percentage of a
borrower's aggregate principal balance. In both cases, the fee paid
to student loan servicers may vary depending on repayment status but
generally do not vary depending on the level of service provided in
a given month. See, for example, First Marblehead Corporation,
Prospectus Supplement: The National Collegiate Student Loan Trust
2007-3 (September 17, 2007), available at https://www.snl.com/interactive/lookandfeel/4094003/NCSLT_2007_3_FPS.PDF and U.S.
Department of Education, Title IV Redacted Contract Awards 12-13,
available at https://www.fbo.gov/spg/ED/FSA/CA/FSA-TitleIV-09/listing.html. Contracts fix monthly compensation on a per-borrower
basis, and the compensation depends on the repayment status of each
borrower being serviced. See also U.S. Department of Education,
Student Aid Administration Fiscal Year 2015 Request, at AA-15,
available at https://www2.ed.gov/about/overview/budget/budget15/justifications/aa-saadmin.pdf. This estimates the average cost per-
borrower to be $1.67 per month, based on the contractual prices and
the proportion of borrowers with different repayment statuses.
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The Regulatory Landscape for Student Loan Servicing
In recent years, policymakers have undertaken broad-based
legislative and regulatory efforts to strengthen applicable federal
consumer financial laws protecting consumers in the servicing of
mortgages and credit cards. For student loan borrowers, there is no
existing, comprehensive federal statutory or regulatory framework
providing uniform standards for the servicing of all student loans.\23\
However, there are limited protections for certain federal student loan
borrowers related to certain aspects of the repayment process.\24\
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\23\ In 2014, the Bureau expanded its examination program for
student loan servicing to supervise both large depository
institutions and larger nonbank student loan servicers for
compliance with federal consumer law, including the prohibition
against unfair, deceptive and abusive practices under the Dodd-Frank
Act. This is the first examination program at the federal level
focused on both bank and nonbank actors in the student loan
servicing market. See Consumer Financial Protection Bureau,
Education Loan Examination Procedures (December 2013), available at
https://files.consumerfinance.gov/f/201312_cfpb_exam-procedures_education-loans.pdf.
\24\ See, e.g., 34 CFR part 682 for certain disclosures and
other requirements for companies servicing FFELP loans.
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There may be variation in the level of service delivered by student
loan
[[Page 29306]]
servicers depending on the type of loan borrowed, the identity of
lender, or the company selected to service the loan. The statutory and
regulatory framework for student loan servicing, and the gaps in that
framework, may contribute to this variation.
Higher Education Act of 1965 (HEA)
Title IV of HEA authorizes the federal student loan programs and
establishes a framework for conduct by and oversight of companies
participating in FFELP, including student loan servicers contracted by
holders of FFELP loans to service these loans. This framework
establishes a number of conditions that loan holders and service
providers must meet in order for federal loan guarantees to remain in
effect, including arranging for periodic independent financial audits
and complying with program requirements established in implementing
regulations.\25\
Congress has amended Title IV of HEA periodically since its
enactment, creating a set of flexible repayment plans, loan
cancellation options, and other protections for borrowers with federal
student loans.\26\ Student loan servicers are responsible for
administering these benefits and protections. In addition, these
amendments have expanded the extraordinary collection tools available
to recover defaulted federal student loans, including extra-judicial
wage garnishment, tax refund offset, and seizure of federal payments,
such as certain benefits administered by the Social Security
Administration.\27\
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\25\ See, e.g., 34 CFR 682.401; 682.416. In addition, HEA
establishes a number of conditions related to the origination of
federal student loans, including specific requirements related to
disclosure and counseling at the time of origination and prior to
entering repayment.
\26\ See, for example, Pub. L. 110-84.
\27\ For example, the Higher Education Technical Amendments of
1991 eliminated the statute of limitations for lawsuits to collect
of federal student loan debt. See Pub. L. 102-26. In addition, a
number of other federal laws govern the collection of debts owed to
the federal government. See, for example, Pub. L. 104-134.
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Amendments to the Higher Education Act Included in the Higher Education
Opportunity Act (HEOA) of 2008
In 2008, Congress enacted HEOA, reauthorizing HEA and amending
Title IV to provide additional protections for borrowers with loans
made through FFELP. Implementing regulations require student loan
servicers to provide certain notices to borrowers with FFELP loans
during the course of repayment, including notices related to account
terms, repayment plans, and servicing transfers.\28\ These regulations
create basic compliance requirements as a precondition for student loan
servicers to maintain eligibility to participate in FFELP.
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\28\ See Pub. L. 110-315. For example, servicers must provide
borrowers with a notice of servicing transfer containing information
about the new servicer 45 days after the effective date of
transfer--a protection that has been triggered for more than 10
million student loan borrowers since 2010. This requirement of
notice does not require any notice to the borrower prior to the
effective date of transfer. In contrast, protections offered to
mortgage borrowers under the Real Estate Settlement Procedures Act
(RESPA) requires notice of a servicing transfer 15 days prior to and
15 days after the effective date of transfer.
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Amendments to the Truth in Lending Act (TILA) Included in HEOA
HEOA also amended TILA to create new protections for borrowers with
private education loans, largely related to the origination of these
loans.\29\ These protections include safeguards to mitigate the risk
that private student lenders will extend credit to borrowers to cover
expenses beyond the total cost of attendance and requirements for
schools entering into preferred lender arrangements with lenders
seeking to market private loans to students.\30\
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\29\ Pub. L. 110-315, 15 U.S.C. 1650.
\30\ TILA and its implementing regulation, Regulation Z,
explicitly exempt credit extended pursuant to Title IV of the Higher
Education Act from requirements established for private education
loans. See 15 U.S.C. 1650a(7)(A)(i).
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Fair Credit Reporting Act (FCRA)
FCRA and its implementing regulation, Regulation V, require
entities that furnish information to consumer reporting agencies to
have reasonable policies and procedures regarding the accuracy and
integrity of information they furnish.\31\ While furnishing is
generally a voluntary activity,\32\ federal student loan servicers have
an affirmative duty to furnish. Title IV of HEA requires that certain
participants in the student loan market furnish information about
federal student loans to consumer reporting agencies.\33\
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\31\ See 15 U.S.C. 1681-1681x; and 12 CFR part 1022.
\32\ See 15 U.S.C. 1681s and 12 CFR part 1022, App. E (``The
Bureau encourages voluntary furnishing of information to consumer
reporting agencies.'').
\33\ See, for example, 20 U.S.C. 1080a.
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Risks for Consumers Repaying Student Loan Debt
In July 2011, the Bureau launched an examination program to
supervise education lending and servicing at the largest depository
institutions.\34\ In December 2013, the Bureau finalized a rule
expanding its supervisory authority to include large nonbank
participants in the student loan servicing market--the companies that
perform more than 70 percent of all nonbank student loan servicing
activity, including those student loan servicers contracted by the
Department of Education to service the federally-owned loan
portfolio.\35\ Nonbank entities perform the vast majority of student
loan servicing activity.\36\ Historically, these entities have not been
subject to federal or state licensing requirements or supervision for
compliance with federal consumer protection laws.
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\34\ In December 2012, the Bureau published the examination
procedures used in examinations of student lending at these
institutions. See Consumer Financial Protection Bureau, CFPB
Releases Exam Procedures for Student Loans (2012), available at
https://www.consumerfinance.gov/newsroom/consumer-financial-protection-bureau-releases-exam-procedures-for-student-loans/.
\35\ Consumer Financial Protection Bureau, Final Rule: Defining
Larger Participants of the Student Loan Servicing Market (December
2013), available at https://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf.
\36\ For further discussion of student loan servicing market
composition, see Consumer Financial Protection Bureau, Final Rule:
Defining Larger Participants of the Student Loan Servicing Market
(December 2013), available at https://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf.
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In October 2011, the Secretary of the Treasury designated a student
loan ombudsman within the Bureau, pursuant to the Dodd-Frank Wall
Street Reform and Consumer Protection Act (Dodd-Frank Act). The
Bureau's student loan ombudsman is required to submit certain reports
to the Director of the Bureau, the Secretary of the Treasury, and the
Secretary of Education related to student loan complaints.\37\ These
reports have focused on private student loans and highlighted a range
of consumer complaints submitted to the Bureau regarding servicing
issues, including:
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\37\ See 12 U.S.C. 5535. In addition, the Higher Education Act
established a Student Loan Ombudsman at the U.S. Department of
Education to assist borrowers with federal student loans. See 20
U.S.C. 1018.
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Payment posting: Some consumers have reported that it
takes servicers several days to process payments and servicers may
charge interest on the outstanding principal during that processing
time. Consumers have complained that servicers may also apply payments
to an account well after they debit funds from a borrower's bank
account. Consumers note that some servicers may take several days to
process payments submitted online, when other financial services
companies are able to credit such payments upon receipt.
Processing prepayments: Consumers may attempt to prepay
their
[[Page 29307]]
loans in order to reduce the amount of interest owed over the life of
the loan. But many consumers have expressed confusion about how to pay
off their loans early. For example, borrowers have complained that
servicers apply payments in excess of the amount due across all their
loans, not to the highest-interest rate loan that they would prefer to
pay off first. These processing problems may result from insufficient
investment in a servicing platform's information technology
infrastructure.
Processing partial payments: When consumers have multiple
loans with one servicer and are unable to pay all of the loans on their
bill in full, borrowers have reported that many servicers instruct them
to make whatever payment they can afford. Many complaints have
described how servicers often divide up the partial payment and apply
it evenly across all of the loans in their account. This may maximize
the late fees charged to the consumer.
Paperwork and account information: Consumers have reported
experiencing lost paperwork submitted to process applications for
forbearance or alternative payment plans. Borrowers have reported that
servicers do not correct errors in a timely fashion. Consumers have
also reported encountering limited access to basic account information,
including their payment history. Some borrowers have reported
difficulty when seeking to determine how their payments have been
applied to interest and principal, particularly when loans are grouped
together for billing purposes.
Servicing transfers: Consumers have noted many servicing
interruptions following a change in servicer. Many of these consumers
were unaware that their loans had been transferred to a new servicer
until the point at which they encountered a problem. Consumers have
explained that, following a change in servicer, they experience
interruptions when receiving billing statements, notices, or other
routine communications. Consumers have also noted that they were
charged late fees because borrowers mailed their payments to their old
servicers. Consumers have complained that, in some cases, servicers did
not process payments correctly post-transfer, if the consumer mailed a
check to the new servicer containing account information from the old
servicer.
Customer service: Consumers have complained that servicing
personnel may not be adequately trained to provide assistance or may be
unaware of resources available to borrowers in distress. This problem
may be exacerbated at companies that service many different loan
portfolios for third-party lenders. Consumers have reported that
servicers transferred them to multiple departments, and, in some cases,
none were responsive or empowered to provide a clear answer. Consumers
have also complained about being unable to reach appropriate service
staff members to correct a mistake in how a payment was applied to
their account. Other consumers have complained about conflicting
instructions from different employees of the same servicer.
Repayment incentives: It is common for lenders to offer
various incentives to borrowers in marketing materials prior to
origination. These might include interest rate or principal reductions
for engaging in activities that increase the likelihood of repayment,
such as graduation or enrollment in an auto-debit program. But
consumers have complained that some servicers place unexpected
obstacles when borrowers seek to apply these benefits.
Issues related to co-signers, including acceleration of
performing loans: Consumers identify a range of issues specific to co-
signed student loans, including problems related to access to basic
account information for co-signers and problems related to co-signer
release, an advertised benefit of many private loans that some
consumers find is prohibitively complicated to obtain. In addition,
many consumers assume that the death of a co-signer, often a parent or
grandparent, will result in the release of the co-signer's obligation
to repay. But many private student loan contracts include provisions
that have been interpreted to provide the lender with the option to
immediately demand the full loan balance upon death of the co-signer.
Many private student loan contracts also include provisions that have
been interpreted to allow the lender to place a loan in default if the
borrower's co-signer files for bankruptcy.
Borrowers have submitted complaints detailing how they face loan
acceleration, including consequences such as credit damage and frequent
debt collection calls, even if the loan was in good standing prior to
and while the co-signer is in bankruptcy, or upon a co-signer's death.
Acceleration may be triggered when data from probate and other court
record scans are matched with a company's customer database, without
regard to whether the borrower is in good standing.
Benefits for members of the military: Servicemembers have
identified problems they encountered when accessing the protections
granted to them under federal rules, including the Servicemembers Civil
Relief Act (SCRA). The hurdles they describe range from not being able
to get the information they need, to being met with roadblocks when
they do try to pursue their benefits.
As noted in these reports, consumer complaints are not necessarily
representative of typical experiences of student loan borrowers.
However, examination and investigative activities have revealed that
problems may not be limited to individual consumers filing complaints.
For example, in 2014, the Federal Deposit Insurance Corporation (FDIC)
addressed alleged misconduct with one large student loan servicer for
illegal practices regarding student loan payment processing.\38\ The
FDIC found violations of a federal law prohibiting unfair and deceptive
practices with regard to student loan borrowers through the servicer's
following actions:
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\38\ Federal Deposit Insurance Corporation, FDIC Announces
Settlement with Sallie Mae for Unfair and Deceptive Practices and
Violations of the Servicemembers Civil Relief Act (May 2014),
available at https://www.fdic.gov/news/news/press/2014/pr14033.html.
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Inadequately disclosing its payment allocation
methodologies to borrowers while allocating borrowers' underpayments
across multiple loans in a manner that maximizes late fees; and
Misrepresenting and inadequately disclosing in its billing
statements how borrowers could avoid late fees.
In addition, the Department of Justice joined with the FDIC to
enter an order providing $60 million in restitution for more than
60,000 servicemembers in an action against the same company, related to
its awarding of benefits under the SCRA to active duty members of the
military.\39\ The FDIC found illegal conduct, including:
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\39\ See Federal Deposit Insurance Corporation, FDIC Announces
Settlement with Sallie Mae for Unfair and Deceptive Practices and
Violations of the Servicemembers Civil Relief Act (May 2014),
available at https://www.fdic.gov/news/news/press/2014/pr14033.html;
and U.S. Department of Justice, United States v. Navient Solutions,
Inc., Navient DE Corporation and Sallie Mae Bank (May 2014),
available at https://www.justice.gov/crt/about/hce/documents/salliecomp.pdf.
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Unfairly conditioning receipt of benefits under the SCRA
upon requirements not found in the law;
Improperly advising servicemembers that they must be
deployed in order to receive benefits under the SCRA; and
Failing to provide complete SCRA relief to servicemembers
after having been put on notice of these borrowers' active duty status.
While supervising for compliance with federal consumer financial
laws,
[[Page 29308]]
the Bureau has also identified illegal practices through its
examination program. Bureau examiners found one or more student loan
servicers were: \40\
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\40\ See Consumer Financial Protection Bureau, Supervisory
Highlights: Fall 2014 (2014), available at https://www.consumerfinance.gov/reports/supervisory-highlights-fall-2014.
---------------------------------------------------------------------------
Misrepresenting minimum payments: Bureau examiners found
that one or more servicers inflated the minimum payment that was due on
periodic statements and online account statements. These inflated
numbers included amounts that were in deferment and not actually due.
Charging improper late fees: CFPB examiners found one or
more servicers were unfairly charging late fees when payments were
received during the grace period. Like many other types of loans, many
student loan contracts have grace periods after the due date. If a
payment is received after the due date, but during the grace period,
the promissory note stated that late fees would not be charged.
Failing to provide accurate tax information: CFPB
examiners found cases where student loan servicers failed to provide
consumers with information essential for deducting student loan
interest payments on their tax filings. The servicers impeded borrowers
from accessing this information and misrepresented information on the
consumers' online account statements. This practice may have caused
some consumers to lose up to $2,500 in tax deductions.
Misleading consumers about bankruptcy protections: CFPB
examiners found that some servicers told consumers student loans are
not dischargeable in bankruptcy. While student loans are more difficult
to discharge in bankruptcy than most other types of loans, it is
possible to discharge a student loan if the borrower affirmatively
asserts and proves ``undue hardship'' in a court. Servicer
communications with borrowers asserted or implied that student loans
were never dischargeable.
Making illegal debt collection calls to consumers at
inconvenient times: Examiners found that one or more student loan
servicers routinely made debt collection calls to delinquent borrowers
early in the morning or late at night. For example, examiners
identified more than 5,000 calls made at inconvenient times during a
45-day period, which included 48 calls made to one consumer.
Presidential Memorandum on a Student Aid Bill of Rights
On March 10, 2015, the President signed a Presidential Memorandum
titled the ``Student Aid Bill of Rights.'' \41\ The memorandum was
addressed to the Secretary of the Treasury, Secretary of Education,
Commissioner of Social Security, Director of the Consumer Financial
Protection Bureau, Director of the Office of Management and Budget,
Director of the Office of Science and Technology Policy, and the
Director of the Domestic Policy Council. The memorandum directed
certain executive agencies to undertake a number of steps to improve
student loan borrowers' experience in repayment, with a particular
focus on enhancing student loan servicing. The memorandum requires the
Secretary of Education, in consultation with the Secretary of the
Treasury and the Director of the Consumer Financial Protection Bureau,
to issue a report to the President ``after assessing the potential
applicability of consumer protections in the mortgage and credit card
markets to student loans, [on] recommendations for statutory or
regulatory changes in this area, including, where appropriate, strong
servicing standards.''
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\41\ The White House, Presidential Memorandum--Student Aid Bill
of Rights (March 10, 2015), available at https://www.whitehouse.gov/the-press-office/2015/03/10/presidential-memorandum-student-aid-bill-rights/.
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Policymakers Have Established a Framework To Strengthen Servicing
Protections for Mortgage and Credit Card Borrowers
The Bureau has observed similarities between the servicing problems
encountered by student loan borrowers and those experienced by
borrowers with other financial products. Loan servicing generally
includes many common functions, irrespective of the underlying consumer
financial product, including account maintenance, billing and payment
processing, customer service, and managing accounts for customers
experiencing financial distress.\42\
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\42\ There are also noteworthy differences between the servicing
of mortgages, credit cards and student loans. These include but are
not limited to differences related to the servicing of loans secured
by real estate compared to unsecured loans, and practices unique to
open-ended products with replenishing lines of credit, commonly used
in repeated transactions.
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During and in the wake of the financial crisis, Congress, state
policymakers, law enforcement officials, and federal financial
regulators sought to address a broad range of loan servicing problems
in the credit card and mortgage markets. Several large mortgage
servicers reached settlements with State and Federal regulators to
address a range of troubling practices.\43\
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\43\ For example, in 2012, the attorneys general of forty-nine
states, the District of Columbia and the federal government reached
an agreement with five large mortgage servicers to address mortgage
loan servicing and foreclosure abuses. See U.S. Department of
Justice, National Mortgage Settlement, available at https://www.justice.gov/ust/eo/public_affairs/consumer_info/nms/; In
addition, there have been a number of cases of alleged improper
treatment of military families, including cases where mortgage
servicers conducted allegedly wrongful foreclosures in violation of
the SCRA, See U.S. Department of Justice, Recent Accomplishments of
the Housing and Civil Enforcement Division, available at https://www.justice.gov/crt/about/hce/whatnew.php (summarizing the
enforcement actions concerning the Servicemember Civil Relief Act).
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Mortgage Servicing
Congress has passed several significant legislative and regulatory
interventions to protect mortgage borrowers from illegal and deceptive
mortgage servicing practices. In 1968 and 1974, Congress passed TILA
and the Real Estate Settlement Procedures Act of 1974 (RESPA),
respectively. Taken together, these statutes provide additional
disclosure requirements and regulate certain acts associated with
consumer risk and harm.\44\ TILA and RESPA also provide a private right
of action and damages in certain circumstances for certain
violations.\45\ Over the past nearly 50 years, Congress has amended
both TILA and RESPA on numerous occasions to add additional protections
for consumers.\46\
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\44\ In addition to TILA and RESPA, Congress enacted the Home
Ownership and Equity Protection Act (HOEPA) in 1994 as an amendment
to TILA, establishing certain disclosures and protections related to
high-cost mortgages. See Pub. L. 103-325.
\45\ 15 U.S.C. 1640; 12 U.S.C. 2605.
\46\ See CFPB Consumer Law and Regulations, RESPA Procedures--
TILA RESPA Integrated Disclosures (applicable for examinations after
the August 2015 effective date), and Mortgage Servicing Requirements
(January 2014), available at https://files.consumerfinance.gov/f/201503_cfpb_regulation-x-real-estate-settlement-procedures-act.pdf
(summarizing amendments to RESPA); See also, CFPB Consumer Law and
Regulations, TILA Procedures--TILA RESPA Integrated Disclosures
(applicable for examinations after the August 2015 effective date),
and Higher-Priced Mortgage Loan Appraisals (January 2014), Escrow
Accounts (January 2014), and Mortgage Servicing Requirements
(January 2014), available at https://files.consumerfinance.gov/f/201503_cfpb_truth-in-lending-act.pdf (summarizing amendments to
TILA).
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In 2010, Congress again intervened by providing additional
protections through the Dodd-Frank Act. The Dodd-Frank Act gave the
Bureau authority to promulgate regulations to implement new mortgage
servicing protections following the wake of the financial crisis and
granted the Bureau with rule-making, supervision, and enforcement
[[Page 29309]]
authority over covered financial institutions.\47\ The Bureau
implemented a series of new rules to significantly improve consumer
protections for mortgage borrowers.\48\ The rules address critical
servicer practices including error resolution, prompt crediting of
payments, and providing payoff statements. They also include
requirements relating to servicer policies and procedures, early
intervention for delinquent borrowers, continuity of contact, and
procedures for evaluating and responding to loss mitigation
applications. These rules protect consumers from detrimental actions by
mortgage servicers and give consumers better tools and information when
dealing with mortgage servicers. For example, the mortgage servicing
rules include:
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\47\ Public Law 111-203.
\48\ See CFPB Consumer Law and Regulations, RESPA Procedures--
TILA RESPA Integrated Disclosures (applicable for examinations after
the August 2015 effective date), and Mortgage Servicing Requirements
(January 2014), available at https://files.consumerfinance.gov/f/201503_cfpb_regulation-x-real-estate-settlement-procedures-act.pdf
(summarizing amendments to RESPA); see also, CFPB Consumer Law and
Regulations, TILA Procedures--TILA RESPA Integrated Disclosures
(applicable for examinations after the August 2015 effective date),
and Higher-Priced Mortgage Loan Appraisals (January 2014), Escrow
Accounts (January 2014), and Mortgage Servicing Requirements
(January 2014), available at https://files.consumerfinance.gov/f/201503_cfpb_truth-in-lending-act.pdf (summarizing amendments to
TILA).
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Notice of transfer of loan servicing. If a lender or
servicer transfers a loan's servicing to a new servicer, the prior
servicer must provide a notice to the borrower no less than 15 days
before the effective date of transfer, and the transferee servicer must
provide a notice not more than 15 days after the effective date of
transfer, with limited exceptions.\49\ In addition, during the 60-day
period beginning on the effective date of transfer, the servicer cannot
treat a consumer's payment as late for any purpose (and cannot charge a
late fee) if the consumer has made a timely payment to the prior
servicer.\50\
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\49\ 12 CFR 1024.33(b).
\50\ 12 CFR 1024.33(c).
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Timely transfer of documents to new servicer. Mortgage
servicers are required to maintain policies and procedures reasonably
designed to facilitate the transfer of information during servicing
transfers.\51\ These policies should be tailored to ensure timely
transfer of all documents and information in the possession or control
of the prior servicer relating to the transferred loan to the new
servicer.
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\51\ 12 CFR 1024.38(a), (b)(4).
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Payoff statements. A servicer must provide a payoff
statement, specifying the amount needed to pay the loan in full as of a
particular date, within seven business days after receiving the
consumer's written request.\52\
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\52\ 12 CFR 1026.36(c)(3).
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Error resolution procedures. Generally, mortgage servicers
must respond to written notices from consumers asserting a servicing
error, such as charges for late fees that the servicer lacks a
reasonable basis to impose.\53\ Within five days of a mortgage servicer
receiving a written notice of error, the servicer must provide a timely
written response acknowledging receipt.\54\ Then the servicer must
correct the error or conduct a reasonable investigation and provide a
written notice that the error has been corrected or conduct a
reasonable investigation and provide the borrower a written
notification that no error has occurred, along with the rationale
behind the determination, and a statement of the borrower's right to
request documents relied upon by the servicer and information on how to
request such documents.\55\
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\53\ 12 CFR 1024.35(a), (b).
\54\ 12 CFR 1024.35(d).
\55\ 12 CFR 1024.35(e).
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Continuity of contact. Mortgage servicers must maintain
policies and procedures designed to assign designated personnel to
respond to the consumer's inquiries, and, as applicable, assist the
consumer with available loss mitigation options.\56\ This gives the
delinquent consumers continuity of contact and the ability to access
information about the mortgage without being transferred to multiple
customer service representatives.
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\56\ 12 CFR 1024.40(a).
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Record retention. Mortgage servicers are required to
retain certain records that document actions taken regarding the
mortgage loan account until one year after the date the loan is
discharged or servicing is transferred.\57\ Records required to be
preserved include a schedule of all transactions debited or credited,
any notes created by the servicer reflecting communications with the
borrowers about the mortgage, and copies of any documents provided by
the consumer to the servicer in accordance with error resolution or
loss mitigation procedures.\58\
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\57\ 12 CFR 1024.38(c)(1).
\58\ 12 CFR 1024.38(c)(2).
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Early intervention for delinquent borrowers. Mortgage
servicers must make a good faith effort to establish live contact with
a borrower no later than the 36th day of a borrower's delinquency.\59\
No later than the 45th day of delinquency, a servicer must provide a
written early intervention notice.\60\
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\59\ 12 CFR 1024.39(a).
\60\ 12 CFR 1024.39(b).
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Credit Cards
In 2009, Congress enacted the Credit Card Accountability,
Responsibility, and Disclosure Act (CARD Act), establishing new
protections for consumers with credit cards.\61\ The CARD Act included
a number of changes to credit card servicing and payment processing
practices. For example, these changes include:
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\61\ Pub. L. 111-24. Consumers with credit cards had a number of
servicing protections in place under TILA prior to the enactment of
the CARD Act, including those related to error resolution, limits on
liability and periodic statements.
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Timely posting of payments. Credit card companies must
credit all payments received by 5 p.m. on the day they are
received.\62\ If they are received by 5 p.m. on the due date, payments
are generally considered to be on-time.
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\62\ 15 U.S.C. 1666c(a).
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Periodic billing statements. Credit card companies must
have reasonable procedures designed to ensure that billing statements
are mailed or delivered at least 21 days before a payment is due.\63\
In addition, credit card companies must disclose on the billing
statement how long it would take the consumer, including how much it
would cost, to pay the full balance on the card by paying only the
required minimum payments.\64\ The statement must also disclose the
monthly payment required to repay the full balance in three years, and
the resulting total cost to the consumer, assuming no additional
transactions.\65\
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\63\ 15 U.S.C. 1666b(a).
\64\ 15 U.S.C. 1637(b)(11)(B)(i) and (ii).
\65\ 15 U.S.C. 1637(b)(11)(B)(iii).
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Application of Payments. Credit card companies, upon
receipt of a payment in excess of the minimum payment amount due, must
first apply the excess to the card balance bearing the highest interest
rate, and then to each successive balance bearing the next highest rate
of interest, until the payment is exhausted.\66\
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\66\ 15 U.S.C. 1666c(b)(1).
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Part B: Questions Related to Student Loan Servicing
The Bureau is interested in responses in the following general
areas, as well as the specific questions below. Part A of this Request
for Information (RFI) provides a general overview of the problems
experienced by consumers when repaying student debt.
In the following section, we offer commenters a series of questions
to consider when responding to this RFI.
[[Page 29310]]
Responses may include answers to the following categories of questions.
Part One of this section solicits feedback on questions related to
general practices in the student loan servicing industry, including
industry practices for borrowers in distress. Part Two seeks comments
on the applicability of consumer protections from other consumer
financial product markets, including the markets for servicing credit
cards and mortgages. Part Three solicits feedback on the availability
of data about student loan performance and borrower characteristics
during repayment. Respondents are encouraged to provide responses to
any of the broad categories of questions outlined below.
Part One: General Questions on Common Industry Practices Related to
Student Loan Repayment
The following section seeks to solicit input on common practices,
policies, and procedures in the student loan servicing market.
Respondents may wish to address any structural features of the student
loan servicing market as they relate to specific practices, including
but not limited to:
The traditional compensation model for third-party student
loan servicing, including compensation related to default aversion and
alternative repayment options;
Information systems used by student loan servicers,
including information systems used to process alternative repayment
options, servicing transfers, and furnishing of credit information; or
Existing federal and state statutory or regulatory
protections for student loan borrowers in repayment.
Respondents may also wish to highlight effective or innovative
approaches to delivering service, including:
Practices by incumbents or new entrants in the student
loan servicing market;
Practices by loan servicers in other markets, including
but not limited to servicing practices for credit cards and mortgages;
or
Alternative business models to traditional loan servicing
that could reduce costs, increase recoveries, or enhance transparency
for borrowers.
Practices Related to Student Loan Repayment
(1) Please describe the extent to which issues related to the
following common student loan servicing policies and procedures should
inform policymakers and market participants considering options to
improve the quality of student loan servicing, including but not
limited to:
a. Processing, allocation, and application of payments (including
partial payments and prepayments);
b. The imposition and disclosure of late fees, including the impact
of late fees across billing groups;
c. Transfer of loans between lenders, loan holders, and student
loan servicers;
d. The complaint resolution process (including the consumers'
ability to adequately request and receive accurate and timely responses
for information and corrections related to their account);
e. Furnishing of credit information to credit reporting agencies
(including the appropriateness, adequacy, and accuracy of the
information furnished);
f. The impact of a single late payment on borrowers' future
abilities to avail themselves of repayment benefits, such as interest
rate reductions for enrolling in auto-debit;
g. Disclosure, accessibility, and availability of refinance
products;
h. Disclosure, accessibility, and availability of options to
release a co-signer from their legal obligation to repay a co-signed
student loan; or
i. Disclosure, accessibility, and availability of options to
discharge or reduce student loan debt in the event of the death or
disability of a borrower or co-signer.
Practices Related to Student Loan Repayment for Borrowers in Distress
(2) Please describe the extent to which issues related to the
following common student loan servicing policies and procedures should
inform policymakers and market participants considering options to
improve the quality of student loan servicing for borrowers in
distress, including but not limited to:
a. Procedures servicers utilize to ensure that borrowers can avail
themselves of alternative repayment options;
b. The circumstances in which a fee occurs or should be
permissible, and the manner of disclosure of servicing-related fees,
including those imposed for modifications or cessation of payment (e.g.
forbearance or deferment);
c. The offering and disclosure of variable rate private loans that
increase the interest rate based on borrower behavior, including missed
payments;
d. Policies and procedures related to acceleration of debts
(including the availability and disclosures of co-signer release
policies);
e. Disclosure, accessibility, and availability of affordable
modification options; or
f. The adequacy and clarity of communication regarding certain
borrower rights to discharge debt (e.g., in cases of school misconduct,
borrower disability).
Impact of Practices Related to Student Loan Repayment for Borrower
Segments With Unique Characteristics
(3) Please identify any unique issues that are specific to certain
segments of the student loan borrower population related to the common
student loan servicing practices, operations, policies, and procedures
described above. Responses should consider borrower segments with
unique characteristics, including but not limited to servicemembers,
veterans, and their families; first-generation college attendees;
current or former attendees of Historically Black Colleges and
Universities (HBCU) or Minority-Servicing Institutions (MSI); and older
Americans.
Part Two: Applicability of Consumer Protections From Other Consumer
Financial Product Markets
Respondents may wish to evaluate existing loan servicing
protections for consumers in other markets, including protections for
consumers with mortgages and credit cards. The following questions seek
to solicit feedback on any conduct requirements required by statute,
regulation, consent decree or other means that should inform
policymakers and market participants when considering options to
improve the quality of student loan servicing. Respondents may wish to
consider aspects of loan servicing in these markets that are common
across products and may also wish to note differences between types of
loan servicing that may make the delivery of service unique to a
particular market. Responses need not address all questions in this
section and need not be limited to the specific provisions identified
below.
Requirements Related to Mortgage Servicing Practices
(4) Describe any mortgage servicing standards or other provisions
under RESPA, TILA or the Home Ownership and Equity Protection Act
(HOEPA) that should inform policymakers and market participants
considering options to improve the quality of student loan servicing.
Responses need not be limited to requirements related to:
a. Payment handling. Specific conduct requirements for mortgage
servicers related to payment handling, including payoff requests or
prompt crediting of payments, and to periodic statements, including the
timing of periodic statements or specific periodic
[[Page 29311]]
statement disclosures for delinquent borrowers.
b. Servicing transfers. Specific conduct requirements for mortgage
servicers in the event of a servicing transfer, including requirements
related to the timing of notices in the event of a transfer of
servicing, record retention requirements for the transferor servicer,
or prohibitions against certain late fees and treating certain payments
as late for a fixed period following the transfer of servicing.
c. Error resolution. Specific conduct requirements for mortgage
servicers related to error resolution and requests for information,
including notices required upon receipt of a written notice of error or
request for information, requirements related to investigations and
error resolution, requirements related to the production of requested
information, and notices required if requested information is not
available.
d. Interest rate adjustment notifications. Specific conduct
requirements for mortgage servicers related to interest rate adjustment
notifications, including notice of interest rate adjustment prior to
the first payment at a new rate and notice of rate adjustment prior to
the first payment due after the rate adjusts, if payment will change.
e. Loan counseling. Specific conduct requirements for creditors
related to homeownership counseling, including the timely provision of
information about homeownership counseling organizations or
requirements related to the confirmation of consumer's completion of
homeownership counseling prior to making a loan that permits negative
amortization to a first-time borrower.
Requirements Related to Mortgage Servicing for Borrowers in Distress
(5) Describe any mortgage servicing standards or other provisions
under RESPA, TILA, or HOEPA that should inform policymakers and market
participants considering options to improve the quality of student loan
servicing for distressed borrowers. Responses need not be limited to
specific conduct related to:
a. Live contact. Specific conduct requirements for mortgage
servicers related to outreach to delinquent borrowers, including the
requirement for mortgage servicers to establish or make good faith
efforts to establish live contact with borrower early in borrowers'
delinquency.
b. Loss mitigation information. Specific conduct requirements for
mortgage servicers related to the disclosure of loss mitigation
options, including the requirement for mortgage servicers to maintain
policies and procedures reasonably designed to ensure that servicer
personnel assigned to a delinquent borrower provide the borrower with
accurate information about loss mitigation options and actions the
borrower must take to be evaluated for such loss mitigation options.
c. Timing requirements for foreclosure filings. Specific conduct
requirements for mortgage servicers related to timing for foreclosure
filings, including the specific prohibition on mortgage servicers from
making the first notice or filing required by applicable law for any
judicial or non-judicial foreclosure process until after a borrower
becomes delinquent for a certain period of time. Respondents may wish
to contrast these requirements with conduct requirements in place
related to servicing student loans in late-stage delinquency.
d. Assignment of continuity of contact personnel. Specific conduct
requirements for mortgage servicers related to ensuring borrowers can
access customer service personnel, including the requirement for
mortgage servicers to maintain policies and procedures reasonably
designed to achieve the objective of assigning continuity of contact
personnel (which can be one or a team of personnel) to a delinquent
borrower who will be available via telephone, and will provide a live
response to a borrower immediately or in a timely manner.
e. Conduct by continuity of contact personnel. Specific conduct
requirements for mortgage servicers related to customer service
provided by continuity of conduct personnel, including the requirement
for mortgage servicers to have reasonable policies and procedures
reasonably designed to ensure that assigned continuity of contact
personnel retrieve in a timely manner written information the borrower
provided to the servicer (or prior servicers) in connection with a loss
mitigation application and provide such information to other persons
required to evaluate a borrower for loss mitigation options made
available by the servicer, if applicable.
f. Prohibition on recommending default. Specific conduct
requirements for creditors related to conditions under which a creditor
can recommend refinancing of a high-cost mortgage, including a
prohibition on recommending default on an existing loan.
g. Prohibition on certain fees. Specific conduct requirements for
creditors related to fees charged to borrowers, including the
requirement that creditors, servicers and assignees cannot charge a fee
to modify, defer, renew, extend, or amend a high-cost mortgage, the
restriction of late fees to four percent of the past due payment and
rules for imposing late fees when a consumer resumes making payments
after missing one or more payments, or the limitation on the imposition
of fees for payoff.
Requirements Related to Servicing Practices in the Credit Card Market
(6) Describe any protections afforded to consumers with credit
cards, including but not limited to protections under the Credit CARD
Act of 2009 (15 U.S.C. 1637), to inform policymakers and market
participants considering options to improve the quality of student loan
servicing. Responses should consider, but should not be limited to:
a. Notice of rate increases and significant changes. Specific
conduct requirements for card issuers related to written notice of an
increase in an annual percentage rate or any other significant change,
including the requirement that such notice be sent 45 days prior to the
effective date of the rate increase or change.
b. Notice of certain penalties for late payments. Specific conduct
requirements for card issuers related to written notices required in
response to borrowers' failure to make a minimum payment within 60 days
of the due date, including the notice requirement triggered when a card
issuer increases the APR or fees.
c. Timing of periodic statements. Specific conduct requirements for
card issuers related to the timing of periodic statements, including
the requirement that a creditor may not treat a payment on an open-end
consumer credit plan as late for any purpose, unless the creditor has
adopted reasonable procedures designed to ensure that each periodic
statement is mailed or delivered to the consumer no later than 21 days
before the payment due date.
d. Posting of payments. Specific conduct requirements for card
issuers related to the posting of payments, including the requirement
that credit card companies credit or treat as on time all payments
received by 5 p.m. on the day they are received.
e. Fees for processing payments. Specific conduct requirements for
card issuers related to fees for processing payments, including the
requirement that a creditor may not impose a separate fee to allow the
borrower to repay an extension of credit or finance charge, such as a
fee for processing a payment, unless such payment involves
[[Page 29312]]
an expedited service by a service representative of the creditor.
f. Application of payments. Specific conduct requirements for card
issuers related to the application of payments, including the
requirement that credit card companies upon receipt of a payment in
excess of the minimum payment amount due, must first apply the excess
to the card balance bearing the highest interest rate, and then to each
successive balance bearing the next highest rate of interest, until the
payment is exhausted.
g. Limitations on changes to fees, charges and annual percentage
rates. Specific conduct requirements for card issuers related to
certain changes to terms, including the requirement that a card issuer
may not elect to increase the annual percentage rate or assess fees or
other charges, with some exceptions.
h. Disclosures related to payments and interest charges. Specific
conduct requirements for card issuers related to disclosures about
payment application and interest charges, including the requirement
that credit card issuer provide disclosures on consumers' periodic
statements warning them that if they make only minimum payments on
their accounts, they will pay more in interest, and it will take longer
to pay off their account balance.
i. Online publication of certain documents. Specific conduct
requirements for card issuers related to the publication of certain
documents online, including the requirement for a creditor to establish
and maintain an Internet site and post the written agreement between
the creditor and the consumer for each credit card account under an
open-end consumer credit plan and that the creditor provide in
electronic format the credit card agreement on the creditor's Web site.
Other Requirements Related to Loan Servicing
(7) To what extent should the specific conduct requirements
included in settlements between financing services providers and state
law enforcement agencies inform policymakers and market participants
considering options to improve the quality of student loan servicing?
Respondents may wish to address, but need not be limited to, specific
requirements contained in the National Mortgage Settlement (NMS),
including protections related to members of the military and their
families.
(8) Describe any other standards of conduct required by statute,
regulation, consent decree or other means that should inform
policymakers and market participants when considering options to
improve the quality of student loan servicing, including but not
limited to, provisions related to:
a. Payment handling and allocations;
b. Periodic statement requirements;
c. Disclosures required on periodic statements;
d. Servicing transfers;
e. Dispute resolution procedures;
f. Request for information;
g. Interest rate adjustment notifications;
h. The imposition of fees;
i. Imposition of interest rate penalties in response to changes in
customer behavior;
j. The availability and accessibility of affordable repayment
options; or
k. The ability for a lender to place a borrower or co-signer in
default based on consumer behavior other than missed payments.
(9) Describe the extent to which the existing statutory or
regulatory protections afforded to consumers under the following laws
should inform policymakers and market participants considering options
to improve the quality of student loan servicing:
a. Truth in Lending Act;
b. Real Estate Settlement Procedures Act;
c. Fair Credit Reporting Act;
d. Fair Debt Collection Practices Act;
e. Electronic Funds Transfer Act;
f. Higher Education Act; or
g. Federal Trade Commission Act.
Part Three: Impact of Limits on Availability of Data About Student Loan
Servicing and Student Loan Repayment on Borrowers
The following section seeks to solicit input about the availability
of data on student loan performance and on borrower characteristics
during repayment. Respondents should consider existing data sources and
gaps in availability that should inform policymakers and market
participants considering options to improve the quality of student loan
servicing.
(10) To what extent do available data and reports about student
loan repayment reveal usage and specific risks to student loan
borrowers, including those related to:
a. Loan performance, delinquency, and default;
b. Utilization of income-driven payment plans and other alternative
repayment options; or
c. Utilization of repayment options that result in temporary
cessation of payment, including deferment and forbearance.
(11) To what extent do gaps in available data create problems for
policymakers or other stakeholders seeking to evaluate consumer risks
as it relates to student loan servicing?
(12) To what extent are publicly available data sets in other
consumer financial markets (e.g., the Bureau's Home Mortgage Disclosure
Act microdata, the OCC's monthly mortgage metrics, and the Bureau's
Credit Card Agreement Database) instructive as policymakers consider
ways to better afford the public and regulators the ability monitor
trends in the market and assess consumer risks?
Authority: 12 U.S.C. 5511(c).
Dated: May 15, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-12276 Filed 5-20-15; 8:45 am]
BILLING CODE 4810-25-P
