Former Student Loan Ombudsman Challenges CFPB in New Report on Borrower Complaints

By Allie Arcese, Director of Communications

By Allie Bidwell, NASFAA Senior Reporter

Borrowers with both federal and private student loans continue to submit complaints about servicing, repayment, and other issues to the federal agency tasked with overseeing financial laws and protecting consumers. But this year, the Consumer Financial Protection Bureau (CFPB) did not publish its annual report analyzing these borrower complaints, according to a new report from the Student Borrower Protection Center (SBPC).

The CFPB is required by statute to submit an annual report to Congress summarizing student loan borrower complaints submitted to the bureau in the last year. Typically, the report is published in October. According to the SBPC—an organization formed by several former CFPB employees, including its former student loan ombudsman Seth Frotman—CFPB under the Trump administration “has failed to fulfil its obligations under the law and live up to its duty to borrowers.”

“In the 382 days since President Trump’s appointees assumed control of the agency, the CFPB has not taken a single substantive action to stand up for student loan borrowers. This includes failing in its statutory obligation to issue an annual report to Congress detailing the problems identified in the preceding year’s student loan complaints,” Frotman wrote in the SBPC report. “Meanwhile, every type of borrower, with every type of loan, at every stage of repayment is getting hurt. Borrowers deserve better.”

The CFPB did not respond to a request for comment.

The new report provides an analysis of student loan borrower complaints submitted to CFPB on or after Sept. 1, 2017, and found many issues already raised by borrowers persist. In total, 13,283 complaints were submitted to CFPB in the last year, taking issue with poor communication from servicers, trouble enrolling in income-driven repayment plans, and for student veterans and servicemembers, difficulty obtaining protections provided to them under the Servicemembers Civil Relief Act (SCRA).

Overall, though, the majority of complaints submitted were about issues with federal student loans. Of the more than 13,000 submitted in the last year, about 5,000 related to the servicing and collection of private student loans. More than 8,000 complaints were related to federal student loan debt, covering a range of issues such as errors when processing payments across multiple loans, issues with receiving information from servicer representatives, and insufficient information and notice for enrolling in and recertifying income for income-driven repayment plans.

The report urged action to implement student loan servicing standards—a recommendation CFPB has made in the past—and said other organizations may need to push for reform in absence of congressional or federal action.

“Borrowers would benefit from improved servicing standards and coordinated federal and state oversight; however, recent actions by the Trump Administration reveal that the U.S. Department of Education has, instead, made a calculated decision—rather than advance new reforms and consumer protections, it is attempting to shield student loan companies from the legal consequences of its abuses,” the report said. “As Washington turns its back on student loan borrowers, policymakers in state capitals and litigators in courtrooms across the country must fill this void, demanding accountability from the student loan industry. The financial futures of a generation of student loan borrowers depend on it.”


Publication Date: 12/17/2018

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