Following the release of the CFPB’s Student Loan Ombudsman report last week, the Consumer Bankers Association said the report “skews the reality” of the private loan market.
CBA President and CEO Richard Hunt said that the CFPB “should be commended” for advising student loan borrowers to notify their servicers how to allocate loan payments.
The CFPB report found that when paying more than the minimum amount due, borrowers faced difficulty sending a single payment to cover several loans under the same servicer, noting that payments were not usually applied in a way that helps pay off the loans with the highest rates fastest.
Hunt said, however, that the report relies on “a sweeping characterization of the market based on 3,800 unverified complaints from 0.002 percent of customers.”
“What remains a continued disappointment is the CFPB has ignored that over 86 percent of student loan borrowers have federal student loans,” Hunt said. “CBA believes the Bureau should help all consumers especially when federal loan portfolios carry a 14.7 percent three-year default rate. It appears these borrowers are under great duress since federal loans, unlike private loans, are funded without determining the borrower’s ability to repay. This is something the CFPB has indicated is the most important consumer protection. A fair, transparent and accurate analysis of the market is what all borrowers deserve.”