WASHINGTON (12/4/13)--Oversight of student loan servicers will be expanded under a new Consumer Financial Protection Bureau-issued rule released Tuesday.
The bureau currently oversees student loan servicing at large banks. Under the new rule, CFPB oversight authority will be expanded to nonbank student loan servicers that manage more than one million federal or private loans. The CFPB will oversee these firms to ensure compliance with federal consumer financial laws.
Nonbank servicers who are not considered "larger participants" may still be subject to the bureau's supervisory authority if the bureau has reasonable cause to determine the servicer poses risk to consumers, CFPB added.
"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," CFPB Director Richard Cordray said. "This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers."
The CFPB said this new oversight regime will grant it the authority to oversee the seven largest student loan servicers and more than 49 million borrower accounts. The bureau noted this represents most of the activity in the student loan servicing market.
The CFPB has frequently noted the impact that student loan debt has on housing, small business ownership, retirement savings and rural communities. A comprehensive CFPB student debt report released this spring found that Americans hold approximately $1.1 trillion in outstanding student loan debt. One-in-five U.S. households have at least one resident that has taken out a student loan. The average outstanding student loan balance is $26,682. One-in-eight student loan borrowers owe more than $50,000, and 30% of all student loan borrowers are delinquent.
The Credit Union National Association has said credit unions could do more to help debt-saddled grads if the maximum credit union student loan maturity of 15 years was increased. CUNA has also formed a student loan working group to explore current issues related to credit unions' offering private student loans to members. The group is working to develop best practices for credit union student loans and to monitor CFPB and National Credit Union Administration student loan activities.