Bipartisan Student Loan Certainty Act Passes; Industry Trade Groups Request TILA Compliance Grace Period

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The Bipartisan Student Loan Certainty Act passed Congress last week and is awaiting the President’s signature. When signed, it will lower the interest rates for federal student loans made on or after July 1, 2013, but also will create some immediate compliance burdens for lenders and servicers. On August 5, four industry trade groups submitted a letter asking the CFPB to (i) implement a 30-day grace period (from enactment) for lenders and servicers to make necessary system changes and update TILA disclosures, and (ii) clarify that lenders and servicers will not be required to modify TILA disclosures provided prior to or during the grace period. Noting that this “will be the second time in less than 45 days that the interest rate for subsidized Stafford loans has changed,” and that the law mandates “an immediate and broad shift in the entire interest rate structure for all Federal Direct Loans,” the letter identifies the significant challenges in complying with the new structure, including the challenges to lenders and servicers in accurately disclosing interest rates as required by TILA. As precedent for the requested transition period, the trade groups refer to the Federal Reserve Board’s allowance for a transition period when it wrote the private student loan regulations in 2009.