Aug 08, 2013 Sean Albert
Short term lending enterprises will welcome the news that the the Consumer Financial Protection Bureau's (CFPB) chief will place a heavy emphasis on revamping the student loan landscape. Recently approved as the official head of the CFPB, Richard Cordray is now able to pursue changing and implementing a number of lending policies he outlined in his lengthy ratification process.
Although many lending outlets have expressed concern over the implementation of additional policies that could limit their ability to function, some lenders may have more time to prepare for their increased regulatory landscape that is set to come.
USA Today reported that Cordray is placing a priority on controlling and limiting student loan products that have contributed to a significant amount of subprime debt for many consumers. The source indicated that Cordray believes that the numerous complaints his office receives pertaining to student loans show that the lending practice needs to be revamped. Of those complaints, most outline problems associated with payment processing, finding accurate loan information and trouble understanding payment option, according to USA Today.
Officials with the CFPB believe that many Americans burdened by student loan debt are limited in their future borrowing plans, which is disadvantageous for both consumers and lenders. From being unable to finance a car or mortgage, student loan difficulties are prohibiting many consumers from making big purchases, some critics claim.
All lenders should note change
Regardless of whether or not alternative lenders believe that student loans have been detrimental to economic recovery, they have an opportunity to better prepare themselves for pending legislation due to the CFPB's focus on student loan providers. Short term lenders could potentially be given more time to ready their enterprises for the increasingly regulatory environment that may be coming in future years if they pay attention to the steps that are taken by the CFPB to address student loan reform.
Although many policies regarding student loans may not apply to other credit products, the measures introduced by the CFPB will set a precedent for how the agency wants to regulate the industry overall.
Reform for student borrowing could happen fairly soon, as the Christian Science Monitor reported that the Senate recently approved a bill that would limit undergraduate loan rates to the 10-year Treasury bond rate plus 2.05 percentage points. For graduate loans, an additional 3.6 percentage points could be tacked on the 10-year Treasury rate if the bill passes through the House and is signed into law.