President Obama signed financial reform legislation this summer that creates a new consumer financial protection bureau (CFPB). The CFPB will have rule writing authority over private student lenders, including bank and non-bank lenders. The CFPB will also have enforcement authority over most private student lenders. A big exception is that other federal regulators will continue to have enforcement authority over banks with assets less than $10 billion (including Sallie Mae’s bank at its current deposit levels). This special edition of NCLC Reports provides details about the new Bureau as well as information about other key components of the financial reform law.
The creation of the CFPB brings new opportunities for consumers to get relief from abusive and unfair credit practices. It will also provide a way for consumers to describe their experiences to an agency that is charged with tracking, researching and helping to resolve consumer credit problems. To get started, we urge consumers to take this survey from Americans for Financial Reform, asking about consumer priorities for the new agency.
There are many actions that the CFPB can take to help private student loan borrowers, including mandatory school certification of private student loans and mandated loss mitigation or other relief for financially distressed borrowers. It is an opportunity to ban mandatory arbitration clauses, stop hidden fees, and set real underwriting standards. These are some of the key issues we documented in our 2008 report on private student loans. We also urge the CFPB and other federal agencies to rewrite the rules so that lenders affiliated with rip-off schools must provide relief to borrowers.
We will write more in future posts as we develop a private student loan agenda focused on low-income borrowers. Please let us know what you think. Bankruptcy reform is also critical, but it is unclear how this will fare in Congress. Stay tuned!