The Consumer Financial Protection Bureau announced plans to expand its supervision of the student lending market, proposing that nonbank student loans services become subject to examinations by the bureau. The proposal is another step by the CFPB to broaden its oversight of nonbank financial players.
The bureau's oversight of student loan servicers has been limited to bank servicers. Under the 2010 Dodd-Frank reform law, the CFPB supervises banks with over $10 billion in assets.
"But tapping Dodd-Frank powers to identify larger participants in certain nonbank sectors for additional supervision, the CFPB said in its proposal that it would begin overseeing the seven largest nonbank student loan servicers in the country. That would capture over 70% of the nonbank student loan market," writes American Banker's Rachel Witkowski.
In the announcement on Thursday, CFPB Director Richard Cordray said an in depth analysis of the companies that process student loan payments and are responsible for loan workouts is critical as more student loans are added to the list of nonperformers.
"We need to make sure they're complying with federal consumer financial laws." Cordray stated in a conference call with reporters.
The CFPB plans to analyze reports and conduct on-site examinations at student loan servicers that work with over one million borrower accounts. Companies would be evaluated for compliance with laws dealing with fair lending, fair marketing and equal opportunity practices.
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