The CFPB Private Education Loan Ombudsman has issued an annual report containing an analysis of approximately 13,900 federal student loan complaints, 6,700 private student loan complaints, and 4,600 debt collection complaints related to private or federal student loans submitted by consumers between September 1, 2017 and August 31, 2019.  The report is the first annual report issued by Robert Cameron, who became the CFPB’s new Private Education Loan Ombudsman as of August 19, 2019. 

The report begins with a bit of history.  It notes that the last Ombudsman report was issued in October 2017 and analyzed complaints submitted between September 1, 2016 and August 31, 2017.  The new report notes that no Ombudsman report was submitted in 2018.  It states that the prior Ombudsman (Seth Frotman) resigned on September 1, 2018 and did not complete the 2018 report prior to his resignation.  The new report also notes that an MOU was not in place with ED from October 1, 2017 through the report’s end date (August 31, 2019) but states that “[n]onetheless, during the past two years, the CFPB and the Department continued to assist borrowers and to receive, review, and attempt to resolve borrower complaints.”  (Democratic Senators recently sent a letter to Mr. Cameron urging him to reestablish an MOU with ED as soon as possible.)

The report then turns to the complaint data.  Regarding private student loan complaints, the report indicates that (1) for the year ending August 31, 2018, the Bureau handled approximately 50 percent fewer complaints than in the previous year (2107), and (2) for the year ending August 31, 2019, the Bureau handled approximately 25 percent fewer complaints than in the previous year (2108).  Regarding federal student loan complaints, the report indicates that (1) for the year ending August 31, 2018, the Bureau handled approximately 44 percent fewer complaints than in the previous year (2107), and (2) for the year ending August 31, 2019, the Bureau handled approximately 8 percent fewer complaints than in the previous year (2108).

The report comments that the increase in complaints in 2017 as compared with 2015 and 2016 may have been attributable to a highly publicized Bureau enforcement action commenced in 2017 against a large student loan servicer in that the “press coverage increased both consumer awareness of issues that may affect them and the likelihood that they followed-up accordingly.”  With regard to the decrease in complaints for the 2018/2019 reporting period, the report comments that “it is not currently known with certainty” why there was a decrease “particularly since the decrease in complaints is occurring while the number of borrowers and the total student loan amount is increasing year over year.  For example, it is unknown whether the decrease is attributable to better practices in the market, improved consumer outreach regarding various requirements, insufficient consumer outreach regarding where to file complaints, or some other factor or combination of factors.”  (While not directly stated in the report, it is notable that the number of complaints handled by the CFPB represents an exceedingly low complaint rate given the millions of federal and private student loans outstanding.)

Complaints and student debt relief companies are the focus of the sections of the report containing the Ombudsman’s discussion and his recommendations:

• The Ombudsman discusses the use of complaint data for supervision and enforcement and the value of complaints to market participants as a tool for early identification of issues and remediation of harm.  He notes that market participants typically monitor complaints as part of a compliance management system and that such systems are subject to supervisory examination.  He recommends that beyond the sharing of information for resolving complaints after perceived or actual harm has occurred, as contemplated by an MOU with the ED policymakers, ED and the Bureau “should assess and consider the sharing of information, analytical tools, education outreach, and expertise in order to proactively prevent borrower harm, and when harm has occurred, reduce the window in which harm is occurring through timely identification and remediation, which in turn reduces the number of affected borrowers and reduces the impact on borrowers who are affected.”
• The Ombudsman describes in detail the methods used by unscrupulous student debt relief companies to deceive consumers and the resulting harm to consumers.  He calls on “[e]veryone involved with student loan borrowers (e.g., lenders, guarantors, servicers, schools, federal and state agencies, and advocates) to participate in combating student debt relief scams through actions that “raise awareness, inform and educate borrowers, file complaints, share information with law enforcement authorities, or bring enforcement actions when appropriate.”  The appendices to the report contain information for market participants and others to use in informing consumers regarding student debt relief companies, including potential red flags.  Most notably, his recommendations include expanding civil enforcement actions to criminal enforcement actions at all levels.  He also recommends the further development and sharing of analytical tools that support civil and criminal enforcement actions, particularly with regard to the data such tools rely on.  He suggests that policymakers consider creating limited exceptions to existing statutes to enable “increased flexibility in changing data elements collected in complaints so that such data elements and complaints may be more reflective of, and responsive to, the changing environment.”  Another recommendation for policymakers is that they “consider encouraging marketing compliance professionals and entities involved in hosting or moderating digital and social media platforms, to discuss how to leverage existing web analytic tools to more quickly identify and protect consumers against student debt relief scams and implement measures to do so.  Further, these parties and other stakeholders should discuss how to identify the entities and individuals behind unlawful debt relief practices and share this information with civil and criminal enforcement authorities.”