Scrutiny For Loan Servicers
Career College Central summary:
Federal regulators next year will begin closer monitoring of companies that process student loan payments for the vast majority of borrowers to make sure they are following the law and not misleading consumers.
Under a rule proposed earlier this year and set to be finalized Tuesday by the U.S. Consumer Financial Protection Bureau, federal regulators will have the authority to oversee a much larger swath of student loan servicers.
The bureau is extending its oversight to all student loan servicers that operate independently from banks and have at least one million accounts. Officials estimated that seven of the nation’s largest non-bank student loan servicers — representing 70 percent of the market — would fall within that threshold.
CFPB employees will be checking whether the student loan servicing companies are complying with a range of existing consumer protection laws. Under the new rule, which takes effect next March, the bureau will have the power to gather information and subject the servicers to formal “examinations” — the term the CFPB uses to describe what are effectively compliance audits.
Regulators will also have the power to step in and stop servicers from engaging in conduct that the bureau deems “unfair, deceptive, or abusive” — even if it isn’t expressly forbidden by the letter of the consumer protection statutes.
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