On Tuesday, the CFPB finalized a proposed rule that allows the watchdog agency to supervise nonbank student loan servicers that handle over one million borrower accounts.
CFPB Director Richard Cordray said the rule, which is estimated to cover the seven largest student loan servicers—which service the loans of nearly 50 million borrowers—applies whether servicers handle private or federal student loans.
“We will be keeping a watchful eye over any servicing company that engages in unfair or deceptive acts or practices toward student loan borrowers,” Cordray said in prepared remarks. “Today’s rule affects one out of every five households in this country and will help address our broader concerns that unmanageable student loan debt may be dragging down people’s lives.”
More than 40 million Americans with student loan debt rely on servicers as their primary contact point regarding their loans. A recent annual report by the CFPB’s Student Loan Ombudsman, however, identified a number of concerns from borrowers regarding prepayment obstacles, partial payments and servicing transfers.
Through the expansion of its supervision, the CFPB can evaluate the extent and scope of issues in the student loan market. Servicers not considered “larger participants”—those with fewer than one million borrower accounts—may still be subject to the CFPB’s supervisory authority if the agency has reason to believe the servicer is a risk to consumers.
“Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules,” Cordray said. “This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers.”