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.”

California and the District of Columbia have recently released regulations under their respective student loan servicing laws.  Each is taking comments on its regulations, but whereas California has merely issued proposed regulations, the District of Columbia has issued emergency regulations that are currently in effect. A brief summary of the regulations and their effective dates appears below, with links to more detailed discussions that also note the extraordinarily small number of complaints to the CFPB from residents of these jurisdictions as well as the bizarre economic impact of these licensing regimes, which will effectively result in the Department of Education paying the administrative expenses incurred by states asserting the authority to supervise federal student loan servicers.

California

The California Department of Business Oversight (DBO) has released proposed regulations under the state’s Student Loan Servicing Act. The legislation, approved by the Governor September 29, 2016, authorized the Commissioner of the DBO to exercise rulemaking authority beginning January 1, 2017. The proposed regulations were issued on September 8, 2017 and are subject to comment until November 6, 2017. Unless exempt, any person directly or indirectly engaged in the business of “servicing a student loan” must comply with the Act and the final regulations beginning July 1, 2018.

In particular, the proposed regulations provide additional restrictions and responsibilities related to the licensing, borrower protection, and recordkeeping provisions of the Act. The borrower protection provisions include requirements related to online account records, the application of payments from borrowers and co-signers, training requirements for customer service representatives, and online and written notifications of borrower benefits. In August the DBO announced that Melinda Lee was selected as the Financial Institutions Manager for the DBO’s new Student Loan Servicing Program. For more information about the proposed regulations, please see our full coverage here.

Washington, D.C.

The District of Columbia Department of Insurance, Securities and Banking (DISB) has released a Notice of Emergency and Proposed Rulemaking to implement the Student Loan Ombudsman Establishment and Servicing Regulation Amendment Act of 2016.  The Act, which became effective February 18, 2017, directed the Commissioner of the DISB to issue rules implementing the Act’s Student Loan Ombudsman and licensing provisions within 180 days of the Act’s effective date.  Although it did not meet that deadline, as we reported, the DISB did start accepting applications and transition filings for the Student Loan Servicer License on the National Mortgage Licensing System (NMLS) on August 10, 2017.

However, as apparently permitted by Section 2-505 of the DC Code, the Student Loan Servicer emergency rules were adopted and made effective on September 8, 2017.  The emergency rules would seem to be subject to comment for at least 30 days and final rules are expected to be adopted before the emergency rules expire on January 6, 2018.  Unless exempt, any person that is directly or indirectly servicing a “student education loan” must comply with the Act and the rules.  The emergency rules outline specific application requirements and ongoing obligations for licensees, such as recordkeeping, renewal, notification, and examination requirements. In addition, we have been informed by the DISB that Charles Burt was appointed as the Student Loan Ombudsman earlier this summer. For more information about the rules, please see our full coverage here.

As we’ve discussed before, the CFPB sued Navient over its student loan servicing practices in the Middle District of Pennsylvania.  In doing so, the CFPB followed its strategy of announcing new legal standards by enforcement action and then applying them retroactively. The chief allegation in the complaint is that Navient wrongly “steered” consumers into using loan forbearance rather than income-based repayment plans to cure or avoid defaults on their student loans.

On March 24, 2017, Navient moved to dismiss the complaint on a number of grounds.  Although the district court, in a decision issued on August 4, declined to dismiss the case, the motion raised several arguments that a court of appeals should not be so quick to gloss over.  We focus here on two of them: fair notice and the constitutionality of the CFPB’s structure.

Fair Notice

Navient argued in its briefs that the CFPB was pursuing them for alleged conduct when Navient was not given fair notice that the conduct, if it occurred, violated the law.  The court used a technicality to decline to consider Navient’s fair notice argument at all.  The court stated that: “[Under the relevant authorities,] Navient’s fair notice argument fails if it was reasonably foreseeable to Navient that a court could construe their alleged conduct as unfair, deceptive, or abusive under the CFP Act.  Navient, however, has only advanced arguments as to why it did not have fair notice of the Bureau’s interpretation of the CFP Act (emphasis added).”  Thus, the court found that it need not consider the fair notice argument.

In doing so, the court ignored authorities Navient cited that held that, as Navient paraphrased, “[a]n agency cannot base an enforcement action on law created or changed after the conduct occurred.”  The court also ignored the obvious and clearly-implied corollary to Navient’s argument: the only way for Navient to be liable for the claims alleged in the complaint would be for a court, namely, the Middle District of Pennsylvania, to adopt the Bureau’s position.  Thus, with all due respect for the court, Navient’s fair notice argument was fairly before it and should not have been so lightly cast aside.

This is especially so given how well-founded the argument seems to have been.  How could Navient have known that the CFP Act required it to provide over-the-phone individualized financial counseling to borrowers as a result of a statement on its website indicating that “Our representatives can help you by identifying options and solutions, so you can make the right decision for your situation (emphasis added).”  The statement was both conditional, and placed the duty for making the right decision squarely on consumers. The court completely ignored the fact that the CFP Act’s prohibition on unfair, deceptive, or abusive conduct would not have alerted anyone that the CFPB or a court would make the inferential leap between that statement and the duty that the CFPB says Navient undertook by making it.

Constitutionality of CFPB Structure

The court also rejected the argument that the CFPB’s structure was unconstitutional.  We’ve discussed before why we believe that such a view is incorrect and even dangerous to our constitution.  But a few of those arguments bear repeating in light of the Navient court’s ruling.  The first problem with the Navient court’s holding is that it applies Humphrey’s Executor in a way that ignores the fundamental holding of the case.  In Humphrey’s Executor, the Supreme Court held that for-cause removal, staggered terms, and a combination of enforcement and law-making powers was acceptable in a multi-member commission.  Its rationale: because of the commission structure, the FTC would operate as a quasi-legislative and quasi-judicial body, not a quasi-executive one.  Not to state the obvious, but the CFPB is not a multi-member commission; its unitary director is like the President, a unitary executive.  Thus, the Supreme Court’s indulgence of these accountability-limiting features in Humphrey’s Executor does not apply to the CFPB.

Second, the retort to this argument, that the CFPB Director is somehow more accountable to the President, is a legal fiction at best. If the President has no power to remove the Director without cause, the Director is not accountable to him. Period. The President can approach the Director, ask him to implement a certain policy, and the Director can ignore the President with impunity. That is not accountability, however one may measure it. It is true that the five FTC Commissioners, the entire board of the Federal Reserve, or the SEC Commissioners could do the same. But, those interactions are more like the ones the President faces in dealing with Congress or the Judiciary, interactions that the Constitution contemplated and intended. With the CFPB Director, the President stands powerless before the unitary executive of a federal agency whose will can stand in direct contrast to his own. If that is not an affront to the Constitution’s notion of the President as a unitary executive, what is?

Third, the Supreme Court also indulged accountability-limiting features in Morrison v. Olsen, because, among other reasons, the inferior officer at issue in the case “lack[ed] policymaking or significant administrative authority.” Such is not the case with the CFPB Director.  The Director is not an inferior officer. More importantly, he has substantial policymaking authority.  The Director has the authority to approve and enforce regulations relating to any consumer financial product or service, companies and individuals involved in providing such services, and service-providers to those companies and individuals.  The CFPB has interpreted its authority to extend not just to banks, lenders, and debt collectors, but to mobile phone companies, homebuilders, payment processors, and law firms. The court in this case ignored these substantial differences between the CFPB Director and the inferior officer approved in Morrison v. Olsen.

Finally, the court ignored the implications of its ruling.  Before long, if the CFPB structure is replicated elsewhere in government, we’ll have a government where Congress, the President, and even the courts are relegated to the sidelines while powerful bureaucrats make law, interpret the law, and enforce it with virtually no political oversight.

* * *

As the case progresses, Navient will continue to defend itself. We will keep a close eye on the case and, as always, keep you posted.

One of the hallmarks of the CFPB’s enforcement actions has been its use of those actions to announce new legal standards. Navient attacks this enforcement strategy in its motion to dismiss a recent case brought against it by the CFPB. On January 18, 2017, the CFPB sued Navient, alleging a number of violations. The chief allegation is that Navient unlawfully “steered” consumers into resolving student loans defaults using forbearance instead of income-driven repayment plans (“IDB”), even in situations where IDB would have been allegedly better for consumers. The motion to dismiss briefing closed on May 15, 2017.

Navient’s main argument is that the CFPB cannot seek penalties against it for the alleged steering because no one had fair notice that steering, if it occurred, violated UDAAP before the enforcement action began.  This is especially so when, as Navient points out, it was governed by the comprehensive rules, regulations, and contractual obligations that never even mention the conduct that the CFPB is suing over.

In addition, Navient argues that the CFPB is required to engage in rulemaking before imposing penalties on industry actors for alleged UDAAP violations. The CFPB is authorized under 12 U.S.C. § 5531(a) to seek fines and penalties against any entity that that engages in “an unfair, deceptive, or abusive act or practice under Federal Law.” Navient argues that “under Federal Law” means the CFPB must declare that conduct violates UDAAP through rulemaking before seeking fines and penalties for alleged violations. This, Navient argues, is supported by § 5531(a)’s placement in the statute immediately before § 5531(b), which allows the CFPB to “prescribe rules . . . identifying as unlawful unfair, deceptive, or abusive acts or practices.” The CFPB disagrees, arguing that “under Federal Law” is a reference to the general prohibition on UDAAPs in § 5536, and that no rulemaking is required prior to a UDAAP enforcement action. No court that we know of has yet addressed this specific issue under Dodd-Frank. How the court resolves this argument could have a substantial impact on how the CFPB does business going forward.

Navient also attacked the premise of the CFPB’s steering claims. For steering to be a violation, Navient argues, the CFPB has to first establish that Navient had some legal duty to counsel consumers on whether IDB or forbearance is better for their individualized situations. In an attempt to manufacture that duty, the CFPB points to general statements on Navient’s website inviting consumers to let Navient help them resolve their student loan defaults. In response, Navient emphasizes that such generalized statements do not create a fiduciary relationship as a matter of law and rightly reminds the court that lenders are not fiduciaries of borrowers.

We will continue to follow this case and keep you posted. Oral argument on the motion has been scheduled for June 27.

On November 18, the GAO released a report examining issues related to implementation of the Servicemembers Civil Relief Act (SCRA) interest rate cap for student loans. The Senate Committee on Homeland Security and Governmental Affairs requested the report in response to indications that servicemembers with student loans who are eligible for an SCRA rate reduction may not always be receiving the benefit. (The SCRA requires creditors and servicers to reduce the interest rate to 6 percent during active-duty service on any pre-service obligation or liability, including student loans.) The GAO report concluded that servicemembers with private student loans may be particularly at risk of not receiving a rate reduction because nonbank private student loan lenders and servicers are subject to neither the same rules nor oversight as those of federal student loans and commercial FFEL student loans (FFEL loans made by private and state lenders that are not owned by the Department of Education). For example, unlike for federal and FFEL loans, servicers of private student loans are not required to identify eligible borrowers and automatically apply the rate cap. Additionally, no agency is currently authorized to routinely oversee SCRA compliance for private student loans made or serviced by nonbank lenders and servicers, such as private companies and institutions of higher education.

In its report, the GAO made a number of recommendations to ensure consistent treatment of eligible servicemembers across all types of student loans. In particular, the GAO recommended that the CFPB coordinate with the DOJ “to determine the best way to ensure routine oversight of SCRA compliance for all nonbank private student loan lenders and servicers,” including developing a legislative proposal to seek additional statutory authority to facilitate such oversight, if necessary.

In its written comments to the report, the CFPB acknowledged that it “shares the GAO’s interest in maximizing the effectiveness of [the] SCRA’s protections” and highlighted the tools currently at its disposal to facilitate SCRA enforcement, such as its collection of SCRA-related consumer complaints and ability to refer potential SCRA violations to the DOJ. Nevertheless, the GAO maintained that the existing tools are insufficient and additional interagency coordination is necessary to close the gap in SCRA oversight.

On Monday the CFPB released updated examination procedures for student loans.  This update revises and expands on a previous update that was released in December 2013 in conjunction with the CFPB’s “larger participants” rule for student loan servicers. The new procedures serve to offer CFPB examiners more detailed guidance for examining student loans servicers subject to the CFPB’s supervisory authority, including banks, private student loan lenders, and others servicers subject to CFPB supervision under the Bureau’s “larger participants” rule.

While these updated procedures introduce a number of changes, the most extensive revisions are found in Module 3, covering student loan servicing. The servicing-related revisions and additions to this module include:

  • Expanding the range of sources and materials that examiners should review in the course of an examination of a student loan servicer, specifically mentioning policies and procedures governing the oversight of subcontractors and service providers, loan records on servicers’ systems, copies of written communications provided to borrowers, call recordings, websites and online accounts using test logins, and “any other relevant documentation”;
  • Adding separate sections calling for assessment of compliance with FCRA and ECOA adverse action notice requirements, addressing loan payoff and billing statements, and covering cosigned private education loans;
  • Introducing an extensive new section titled “Borrower Communications for Federal Loans,” which addresses communications to borrowers regarding the various repayment options available to borrowers with FFELP loans and Direct Loans (i.e. those originated by the Department of Education), as well as a similar section pertinent to servicers of private education loans offering alternative repayment plans or loan modification options;
  • Revising and expanding module sections on payment processing, servicing transfers, in-school deferment and repayment, and borrower benefits (such as reductions for ACH payments, graduation bonuses, payment deferment for active duty service members, Teacher Loan Forgiveness, Perkins Loan Cancellation, Defense to Repayment, and Public Service Loan Forgiveness for certain federal student loan borrowers working for qualifying employers).

To help identify the revisions made by the CFPB, we created a blackline copy of the revised procedures that compares the updated procedures to the previous (December 2013) version.

The CFPB has released its fifth Annual report of the CFPB Student Loan Ombudsman discussing complaints received by the CFPB about private and federal student loans and the lessons drawn by the Ombudsman from those complaints.  The report states that it is based on the CFPB Student Loan Ombudsman’s analysis of approximately 5,500 private student loan complaints and 2,300 debt collection complaints related to private and federal student loans handled by the CFPB between September 1, 2015 and August 31, 2016.  (We note that this time period overlaps with the October 1, 2014 through September 30, 2015 period covered by the Ombudsman’s 2015 annual report.  In addition, it is inconsistent with the CFPB’s press release which stated that the new report “was informed by consumer complaints submitted to the CFPB between Oct. 1, 2015 and May 31, 2016.”)

The report also analyzes approximately 3,900 federal student loan complaints submitted between March 1, 2016 and August 31, 2016.  The CFPB began taking complaints about federal student loans on February 25, 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.)

In his 2015 annual report, the Student Loan Ombudsman focused on servicers’ alleged failure to help distressed private and federal student loan borrowers enroll or stay enrolled in affordable or income-driven repayment plans.  In this year’s report, the Ombudsman focuses on complaints about the transition from default to an income-driven repayment (IDR) plan.  The new report indicates that, contemporaneously with its publication, the CFPB sent a data request to several of the largest student loan servicers calling for new information about their policies and procedures related to service provided to previously defaulted borrowers.  A copy of the data request is attached as Appendix C to the report.

The report describes various problems allegedly experienced by borrowers when making rehabilitation payments to debt collectors, such as retroactive invalidation of payments, and when a loan is transferred from a debt collector to a servicer, such as a lack of clear communication.  It also describes various problems allegedly experienced by borrowers after curing a default through an income-driven rehabilitation and then seeking full enrollment in an IDR plan, such as poor customer service.

The report reviews data related to rehabilitated loans, including projections that approximately 45 percent of FFELP borrowers rehabilitating their loans will default again (three-quarter of whom will default in the first two years following rehabilitation).  It discusses the outdated nature of the rehabilitation program, observing that it has not been revised in more than two decades and does not reflect two major changes to the federal student loan program in the intervening years – the termination of bank-based guaranteed lending and the establishment of a near-universal right for borrowers to make payments under an IDR plan.  The report suggests that use of a direct consolidated loan  rather than rehabilitation to cure a default can provide a faster track  to an IDR plan for some borrowers, and contains a diagram that compares the rehabilitation process to income-driven consolidation.

The report makes several recommendations for how policymakers and industry can address the problems discussed in the report, including the following:

  • In light of the rehabilitation program’s outdated nature, the Ombudsman urges policymakers to reassess the treatment of borrowers with severely delinquent or defaulted loans and to consider streamlining, simplifying or enhancing the current consumer protections in place for such borrowers.
  • To address problems discussed in the report, the Ombudsman urges policymakers and industry to consider various actions, including requiring collectors to initiate and assist borrowers seeking to complete applications for IDR plans and to hand-off these documents to servicers for processing, enhancing servicer communications to borrowers transitioning out of default, such as using personalized communications related to IDR enrollment, and using incentive compensation for debt collectors and servicers that is linked to a borrower’s enrollment in an IDR plan and successful recertification of income after the first year of enrollment.
  • The Ombudsman contends that borrowers, industry, and regulators would benefit from periodic publication of identifiable, servicer-level data related to the performance of previously-defaulted borrowers.  (The Department of Education directed the publication of servicer level data in the memorandum it released in July 2016 to provide policy direction for the new federal student loan “state-of-the-art loan servicing ecosystem” that the ED is currently procuring.)

 

Senator Elizabeth Warren is scheduled to be the keynote speaker today for “National Student Debt Day,” an event in Washington, D.C. for “student loan activists from around the country.” The event is sponsored by Young Invincibles, which describes itself as “a national organization, working to engage young adults on issues, such as higher education, health care, and jobs.”

Her remarks can be expected to fuel CFPB and Department of Education efforts to place pressure on lenders and servicers to provide more refinancing options to student loan borrowers.

 

In a letter sent last week to U.S. Department of Education Secretary Arne Duncan, four U.S. Senators urge the ED “to direct federal student loan servicers, debt collectors, and all other third parties” to delay use of the new robocall authority given by the Bipartisan Budget Act of 2015.  Two Senators are Democrats (Elizabeth Warren and Edward J. Markey) and two Senators are Republicans (Michael S. Lee and Orrin G. Hatch).

Signed into law by President Obama on November 2, 2015, Section 301 of the Budget Act amended the Telephone Consumer Protection Act (TCPA) to create a new exemption for debt collection robocalls made to cellular and residential telephone numbers.  Prior to the amendment, such calls would have been prohibited absent the recipient’s prior express consent.  As amended by Section 301, the TCPA now allows such calls to be made without the recipient’s prior express consent if such call, when made to a cellular phone, “is made solely to collect a debt owed to or guaranteed by the United States,” or, when made to a residential line, “is made solely pursuant to the collection of a debt owed to or guaranteed by the United States.”

The Senators assert that the robocall authority should not be used until the ED can “demonstrate with data that the use of this authority will provide net benefits for both student loan borrowers and taxpayers and will not result in potentially abusive debt collection practices.”  They also contend that the new robocall authority cannot be used until the FCC issues implementing regulations and that such authority can only be used for calls to student loan borrowers and not to “their relatives or references that may be secondarily responsible for the debt.”  In their letter, the Senators ask the ED to tell them by January 11, 2016 whether it agrees with their interpretations of the TCPA amendments.

The Senators’ interpretations do not appear to be supported by Section 301.  Section 301 has no explicit effective date.  In contrast, other Budget Act sections have explicit effective dates, including one section with an effective date that is tied to the issuance of implementing regulations.  While Section 301 directs the FCC, in consultation with the ED, to issue regulations to implement Section 301, it does not provide that that Section 301 is ineffective until such regulations are issued.  Also, the rulemaking authority provided by Section 301 only allows the FCC to “restrict or limit the number and duration of calls made to a telephone number assigned to a cellular telephone service to collect a debt owed to or guaranteed by the United States.”  Accordingly, such regulations would not impact robocalls to residential telephone numbers.

In addition, nothing in the language of the exemption suggests that it allows robocalls only to a student loan borrower and not to others who are liable for the loan.  The exemption’s only limitation is that the robocall must be made “solely to collect a debt owed to or guaranteed by the United States’’ or “solely pursuant to the collection of a debt owed to or guaranteed by the United States.”  Finally, the Senators are asking the ED to revisit a policy decision about the benefits of these calls that was made by the Congress in enacting the TCPA amendments and the President in signing them into law.

We will be interested to see whether the CFPB shares the Senators’ interpretations of the robocall exemption in connection with examinations of student loan servicers and debt collectors involved with federal student loans.

 

Pursuant to a March 2015 Presidential directive, an interagency task force consisting of the Department of the Treasury, Department of Education, Office of Management and Budget, and Domestic Policy Council has issued recommendations on best practices in performance-based contracting intended to ensure that federal student loan servicers “help borrowers responsibly make monthly payments on their student loans.”  In developing its recommendations, the task force consulted with the CFPB.

The task force recommended that Federal Student Aid (FSA) take the following actions:

  • Use a compensation structure that provides incentives to servicers to keep all borrowers current and also provides targeted incentives based on the performance of borrowers identified by FSA as being at a greater risk of default when they leave school.  FSA should evaluate the impact of the targeted incentives on borrower performance to determine whether they should continue through the duration of the servicing contract.
  • Use an allocation formula that is structured to award new loan volume based on a comprehensive set of metrics that measure servicer performance in (i) driving positive borrower performance, (ii) providing quality customer service, and (iii) adhering to contract requirements and maintaining strong business practices and internal controls.
  • Establish a minimum level of required services to be provided by servicers that includes
    (i) certain standardized communications (such as “a core set of clear, easy-to-read tables that contain consolidated loan information that is most valuable for the borrower to make informed decisions”), and (ii) technology-enabled communication methods, with enhanced, “higher-touch” servicing requirements for borrowers at risk of default, including those identified as being at greater risk of default at school separation and those who become delinquent.  (The task force also recommended that servicers be allowed to apply for waivers of certain requirements on a subset of borrowers “to test innovative strategies that improve borrower outcomes.”)
  • In conjunction with the development of a centralized complaint system, implement a standardized complaint process that provides for clear borrower rights, a specific process to address borrower complaints about servicer interactions, and an escalation process with an FSA resource to address escalated complaints.
  • Use oversight and auditing of servicers to monitor compliance with contractual requirements and incorporate compliance assessments into performance metrics.  Servicers should be subject to administrative and contractual sanctions, including withholding of payment and penalties for noncompliance or other contract violations.