New CFPB Procedures for Student Lenders
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UPDATED: Dec 18, 2012
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Yesterday, the Consumer Financial Protection Bureau (CFPB) released new procedures the agency will implement for student loan lenders to ensure banking regulations are followed.
The new procedures will impact lenders of both private student loans and the servicers for federally guaranteed loans who violate consumer protection laws. It will be used to examine both large banks and non-banks that authorize student loans.
The main task for the CFPB is to review if student lenders have appropriate processes in place to prevent harm to borrowers. The CFPB will penalize any violators of the new implementations. The new rules include:
- Using accurate marketing and advertising
- Marking appropriate disclosures
- Providing accurate account information
- Handling borrower inquiries and complaints
CFPB examiners will review advertising materials from student lenders to ensure the materials are not deceptive, discriminatory or misleading. The materials range from text messages, telephone solicitation scripts, mail, agreements and disclosure statements.
Examiners will also assess if the lenders make clear disclosures to the borrowers about student loan costs and the terms involved, during the application process, loan approval and loan disbursement time frames.
Borrowers are legally allowed access to information about their loans. The CFPB will ensure that service providers, if requested, supply the borrowers with statements. The statements should include monthly payments, charges, fees and any changes to the interest rate.
If complaints arise, CFPB examiners will undertake certain measures to ensure that lenders provide ways for customers to ask questions and post concerns. The various communication methods will be reviewed for accuracy and clarity.
The new guide, as a part on an ongoing process, will help facilitate communication between borrowers and lenders.
“For many borrowers, a student loan may be their first major financial decision,” CFPB director Richard Cordray said in a press release. “With student debt topping a trillion dollars, we will be working to ensure consumers are treated fairly and lenders are held accountable.”
The CFPB told loans.org that they were unable to release any additional comments about the new procedures.