Student loan servicers and providers of campus financial product were the focus of remarks given yesterday by Director Cordray at the Ohio College Presidents’ Conference.
Director Cordray stated that the CFPB estimates that eight million Americans “are now in default on a student loan – and strengthening student loan servicing is essential to getting this growing problem under control.” He also stated that the CFPB shares “the concerns of many in the higher education community that student loan servicing needs drastic improvement.”
Servicing issues related to the collection of defaulted student loans were specifically identified in the CFPB’s Winter 2015 Supervisory Highlights. In addition, earlier this year, the CFPB sent letters to check on the progress that student loan lenders and servicers have made in developing modification options. However, to date, the CFPB has said nothing further about the responses it has received.
With regard to campus financial products, Director Cordray continued to take colleges to task for failing to adequately disclose their marketing agreements with financial institutions. He referenced the model “Safe Student Account Scorecard” the CFPB issued for comment in January 2015 which is intended to be used by colleges and universities to obtain information from prospective financial institution partners offering financial products to students.
He also commented that “all contracts between schools and financial institutions to offer financial products to students-including checking account products, prepaid account products, and credit card products-should be entirely transparent to students, their families, and the public. I frankly see no reason why any school would fail to put these contracts on-line as an easy means of disclosure that allows ready access to their terms. That is now easy as a matter of technology, and any further obstacles to this kind of transparency are not justified.”
Director Cordray’s remarks on campus financial products echo statements made in the CFPB’s fifth annual report on college credit card agreements issued in December 2014. In that report, the CFPB appeared to be criticizing colleges and financial institutions for not disclosing marketing agreements for such products on their websites.
As we commented when we blogged about the report, the CFPB’s apparent position that adequate public disclosure of campus agreements requires the agreements to be posted on a website finds no support in applicable law. The Official Commentary to Regulation Z expressly allows colleges to satisfy the CARD Act requirement for public disclosure of their credit card marketing agreements either by posting the agreements on their websites or by making the agreements available on request, as long as the procedures for requesting the documents are reasonable and free of cost. And unlike credit cards, there is no federal law that requires financial institutions to publicly disclose their marketing agreements or similar information for other financial products.
The December 2014 report contained a veiled threat of increased CFPB scrutiny for financial institutions that fail to meet the CFPB’s expectations for disclosure of campus marketing agreements. Director Cordray’s latest remarks suggest that both financial institutions that partner with colleges and student loan servicers will continue to be a CFPB focus in 2015.