Effective March 1, 2014, the Bureau of Consumer Financial Protection (CFPB or Bureau) will begin supervision of larger participants in the nonbank student loan servicing market.
The CFPB released a final rule on December 3, 2013 that amends its regulations defining larger participants of certain consumer financial products and services markets by adding a new section defining larger participants of a market for student loan servicing. The rule, which is substantially similar to the proposal released in March 2013 (please refer to Regulatory Practice Letter 13-09), subjects any nonbank student loan servicer that handles more than 1 million borrower accounts, including both Federal and private student loans, to CFPB supervisory authority. The Bureau estimates there are fewer than 50 nonbank student loan servicers and that the one million account threshold will provide the CFPB with authority to supervise the seven largest nonbank student loan servicers, which collectively service an estimated 49 million borrower accounts. The CFPB states these accounts represent “more than 70 percent” of the activity in the nonbank student loan servicing market. Director Cordray separately noted “it also levels the playing field by covering the larger nonbank servicers, since our examiners are already supervising the largest student loan servicers that are banks.”
The CFPB notes that nonbank student loan servicers who do not meet the borrower account threshold may still be subject to the Bureau’s supervisory authority if the Bureau has “reasonable cause to determine the servicer poses risk to consumers.”
Earlier in the year (October 2013), the CFPB released the second Annual Report of the CFPB Student Loan Ombudsman, which analyzed approximately 3,800 private student loan consumer complaints received by the CFPB through September 2013. The CFPB summarizes that the majority of the complaints were related to requests for loan modifications, payment reductions, or “opaque or inaccurate payment processing.” Concurrently, the CFPB released a Consumer Advisory intended to assist borrowers in directing servicers on how to apply excess payments when the consumer has multiple student loans.