The CFPB has released the sixth annual report of the CFPB Student Loan Ombudsman containing an analysis of approximately 12,900 federal student loan complaints, 7,700 private student loan complaints, and 2,300 debt collection complaints related to private or federal student loans handled by the CFPB between September 1, 2016 and August 31, 2017.  The CFPB began taking complaints about federal student loans in February 2016. (The number of complaints handled by the CFPB continues to represent an exceedingly low complaint rate given the millions of federal and private student loans outstanding.)  The report also provides examples of how consumer complaints have resulted in beneficial changes for borrowers and makes recommendations to policymakers and market participants.

In the section of the report analyzing complaint data, the CFPB highlights various issues raised by consumers, including the following:

  • Federal student loans. The CFPB states that consumers submitted complaints “against over 150 companies covering nearly every aspect of the student loan repayment cycle.”  Among the issues raised by consumers deemed “most significant” by the CFPB are: problems accessing federal student loan protections such as income-driven repayment (IDR) plans, including obstacles encountered when seeking to enroll in an IDR plan or attempting to recertify an IDR plan, and servicing-related problems experienced by “vulnerable” borrowers, such as disabled borrowers receiving Social Security disability payments and military borrowers.
  • Private student loans. The CFPB discusses complaints involving limited options for payment relief during periods of financial hardship; difficulties accessing advertised loan benefits and protections such as interest rate reductions for on-time payments; inadequate information about cosigner release qualification; and the failure of servicers to allocate payments according to borrower instructions.
  • Debt collection. The CFPB discusses complaints involving aggressive or hostile debt collector tactics and debt collector practices that delay the borrower’s ability to start a rehabilitation program and cure a default.

In the “Ombudsman’s discussion” section of the report, the CFPB touts its “efficient and thoughtful approach to handling consumer complaints” and observes that the functionality of its complaint system “is unmatched by any other federal or state agency complaint system.”  The discussion focuses on three examples of how “individual consumer complaints led to increased scrutiny by a regulator or law enforcement agency with the authority, tools, and will to take action on behalf of borrowers, after these complaints were highlighted by the CFPB Student Loan Ombudsman.”

The three examples consist of:

  • Military servicemember borrower complaints regarding SCRA benefits that resulted in enforcement actions by the DOJ and FDIC and the implementation of an automated process by the Department of Education (ED) for identifying borrowers eligible for SCRA interest rate reductions.
  • Federal student loan borrower complaints about servicing practices related to the process of applying for and enrolling in IDR plans that resulted in the Ombudsman’s August 2016 report on challenges encountered by borrowers in pursuing rights to affordable payments under the Higher Education Act; CFPB examiners citing student loan servicers for unlawful practices in connection with IDR plan applications; and the ED’s strengthening of its contractual requirements relating to IDR plan applications for servicers handling federal student loans for the federal government.
  • Private student loan borrower complaints about “auto-defaults” resulting in the Ombudsman’s highlighting problems relating to auto-defaults in its 2014 annual report; CFPB examiners citing student loan servicers for unlawful practices in connection with auto-defaults; and changes by industry participants relating to auto-defaults such as the removal or modification of contract provisions that could be interpreted to permit auto-defaults.

The report includes a recommendation for the adoption of “industrywide standards to strengthen servicing practices, coupled with robust oversight across federal and state agencies” as a way to “help shape a student loan repayment process that meets borrowers’ needs by ensuring that borrowers are treated fairly, that they can access the benefits and protections guaranteed under law or contract, and that they can successfully satisfy their student debt.”