CFPB Publishes Update on Student Loan Complaints

CFPB Servicemembers SCRA DOJ

This afternoon, the CFPB published a “mid-year snapshot” of private student loan (PSL) complaints it received from October 2012 through March 2013. The report updates the Bureau’s initial student loan complaint report published in October 2012.

This latest report characterizes the volume of student loan complaints as “relatively steady” over the reporting period, with complaints about loan repayment issues, including an inability to modify loans, outpacing all others. In addition to repayment-related complaints, the CFPB highlights a number of other PSL servicing complaints, including those related to (i) payment processing, (ii) conflicting information provided by lender or servicer, (iii) lack of written notices from lender or servicer, and (iv) co-signer issues.

For example, with regard to payment processing, the CFPB states that many complaints relate to the situation in which the consumer sends one payment to cover several loans handled by the same servicer. The CFPB has found that servicers generally apply those funds to satisfy outstanding fees, interest and principal, and then allocate any remaining overpayment to the outstanding principal across all loans on a pro rata basis. In some cases, depending on the size of overpayment, the servicer may also advance the due date for future payments. The CFPB believes these practices, and the way servicers have communicated them, have caused “significant borrower confusion” while limiting consumers’ ability to control the application of their overpayments. The report notes that certain online servicing platforms do not provide a simple way for consumers to allocate excess payments.

Finally, the CFPB states, in both the report and a related blog post, that, despite improvements by PSL servicers, some servicemembers continue to have difficulties obtaining rate relief under the SCRA and that the Bureau will continue to work with the DOJ on potential SCRA violations.

Importantly, the report is a “snapshot,” and the CFPB cautions in its introduction that the report is not intended to communicate the frequency to which certain practices exist in the market and that readers should recognize that there are inherent limitations with the underlying data. This is perhaps most evident in the CFPB’s listing of complaints by company, without providing any context as to each company’s market share, and without connecting the types of resolution – which themselves have limited utility – with the various companies named.