The CFPB has issued a “Mid-year snapshot of private student loan complaints” that discusses issues raised in the 2,002 complaints the CFPB received from October 2012 through March 2013.
In the First Annual Report of the CFPB Student Loan Ombudsman which was released last October, the CFPB highlighted servicing issues raised by private student loan borrowers in their complaints, such as a lack of repayment options and their inability to refinance or modify loans. In the snapshot, the CFPB indicates that the largest subset of consumers continues to complain about their inability to modify repayment terms.
The snapshot also includes issues relating to payment processing, noting, for example, problems when one payment is sent to cover several loans handled by the same servicer. Borrowers paying more than the scheduled payment complained about the difficulties they had getting servicers to apply their payments the way they wanted. Instead of paying the loans with the highest interest rates, servicers would follow other payment allocation rules. Borrowers paying less than the scheduled payment complained that servicers were not processing their payments to satisfy as many loans as possible. Instead, servicers would distribute their payments among all loans on a pro rata basis and thereby create deficiencies in all loan accounts and resulting late charges.
Other top servicing issues involved: (1) receipt of incomplete, inaccurate or inconsistent information from servicers or originators, (2) difficulty in obtaining loan documentation and inconsistent receipt of written notices such as rate change notices and billing statements, and (3) co-signer issues such as difficulty accessing account information or difficulty in having payments applied only to co-signed loans.
But the servicing issue reported by consumers discussed in the snapshot that is likely to have the most immediate ramifications is the continued difficulty experienced by some military borrowers in obtaining benefits under Servicemembers Civil Relief Act (SCRA) programs (such as requests for additional documentation to retain the 6% rate cap). In the snapshot, the CFPB indicates that while some lenders and servicers have addressed SCRA problems, the SCRA continues to be a subject of complaints and the CFPB is coordinating with the Department of Justice regarding these violations.
We continue to encourage student loan servicers to engage in self-assessments of their practices and procedures, before the CFPB comes knocking at the door, and we are already actively engaged in assisting our clients in doing so.