Student loan servicers come under CFPB oversight
Dec 16, 2013 Sean Albert
When a high school student and his or her parents consider pursuing higher education, this is not a choice to make lightly. It's usually a four-year commitment, and if the attendee isn't dedicated to doing well, he or she can severely limit future opportunities.
However, finances might be one of the biggest things a family must consider before sending a child to college. It seems like tuition prices are always going up, and the cost to attend a good U.S. university for four years can now be well into six digits. Sure, things like scholarships are very helpful, but only in rare cases do they cover the entire cost of tuition. Then, there are elements like room and board, as well as laptops, notebooks and textbooks, among others, to consider. The cost of college is often misleading and tends to be more than people realize.
So what are families to do? Many individuals and their parents have to take out loans at some point, either from traditional or alternative financial services. Because this has become such a common occurrence, lenders should be aware that the Consumer Financial Protection Bureau (CFPB) recently decided to oversee the companies that service student lenders.
CFPB will become the authority in the spring
According to The Washington Post, the CFPB will begin overseeing the seven largest student loan servicers in the country on March 1, 2014. The news source explained that on this list are companies like Sallie Mae, Ed Financial and Great Lakes, while the organization already supervises traditional banks in this manner. These are the businesses that process the debt accounts and payments made by consumers.
CFPB Director Richard Cordray explained that this action was taken following consumer complaints about payment and data transfer issues, insideARM reported.
Implications for the future
The Washington Post noted that the CFPB will be making sure that these servicers comply with various federal laws and give clients financial statements as needed. While this move doesn't expressly impact the short term lending industry, that's not to say that the organization won't turn its eye toward the alternative credit sector where academic loans are concerned.
The CFPB has become much more involved in the alternative sector as of late, so lenders should be prepared to have their payment processes and servicing partners be more closely examined in the near future.