Companies that service student loans will get more scrutiny from the federal government under a new rule proposed by the Consumer Financial Protection Bureau.
On Thursday the bureau proposed a rule that would allow it to supervise big student loan servicers, the companies that manage loans on behalf of borrowers and lenders. Servicers send out statements, collect payments, answer questions, track interest and generally provide day-to-day oversight of the loans.
The bureau already regulates big banks that service loans, but the vast majority of student loans are serviced by “nonbank” financial companies, the bureau said. Under the new rule, servicers with a million accounts or more would fall under the agency’s umbrella, whether or not they are considered banks. That would give the agency authority over the seven largest servicers, which handle nearly 50 million loans.
An agency spokeswoman declined to identify the top servicers that would come under the agency’s scrutiny. But data from the Student Loan Servicing Alliance indicate that Sallie Mae is by far the largest nonbank servicer of student loans, with nearly $197 billion in servicing volume at the end of 2011. Other big servicers include American Education Services and ACS Education Services.
“The student loan market has grown rapidly in the last decade, and servicers are now facing the stress of an increasing number of delinquent borrowers,” Richard Cordray, the agency’s director, said in a prepared statement.
The new rule would give the bureau the authority to make sure the servicers comply with federal consumer laws and are all following the same rules. The proposal would give the agency authority to regulate companies that service both federal loans and private loans.
The bureau has been looking into problems with student loan servicing. Complaints received from borrowers include difficulty in getting accurate information from servicers about how much is owed, confusion over fees, delays in having payments credited and difficulty in getting help when borrowers run into financial trouble.
Comments on the proposed rule will be accepted for 60 days after it is published in the Federal Register.
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Article source: http://bucks.blogs.nytimes.com/2013/03/14/keeping-a-closer-eye-on-student-loan-servicing-firms/?partner=rss&emc=rss
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