Banks have been under strict scrutiny in the wake of the housing crisis that involved allegations of predatory lending, robo-signing and a combination of other factors. A consumer watchdog group has also put the large banks that collect student loan payments whether private or ones that are backed by the government. The group ensures that those paying off student loans are not getting hit with huge fees, having payments misapplied or having to resubmit lost documents.
That group is the Consumer Financial Protection Bureau and it is asking that the over 49 million people with student loans serviced by non-banks be brought under the agency’s umbrella of protection. There are approximately seven large, non-bank services that make up “most of the activity” according to the CFPB.
The major concern for the CFPB’s request to bring the non-bank collection companies under their oversight is the shocking number of students who have fallen behind on scheduled payments. Students have repeatedly reported that these companies have failed to accurately apply payments that they have made and that the customer service when they attempt to contact the companies is sorely lacking.
Even the big banks seem to be on board with this request — at least to “even the playing field.” These banks say that they are under the strictest scrutiny while the non-bank servicers are not. This means that they are forced to incur costs that are not weight on the other side. Take for example having to submit information to the CFPB without even a hint of suspicious behavior. Information submission may not seem like a costly task, but the resources and expenses related to compiling, organizing and submitting can actually add up fast — especially with the amount of information requested in most instances.
Whether the Consumer Financial Protection Bureau is granted their request or not, individuals can seek the assistance of a debt relief attorney when collectors cross the lines.
Source: The Washington Post, “Gov’t consumer watchdog wants stricter oversight of student lenders as more borrowers default,” March 14, 2013
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