CFPB Releases Report on Student Loan Complaints

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In alignment with its recent focus on private student loans, the CFPB releasedreport describing the types of complaints it received related to “auto defaults”, the practice of placing private student loan borrowers in default despite the fact that their loans were current and in good standing. The report, which covers the period of October 1, 2013 to March 31, 2014, indicated that many of the complaints centered around industry participants automatically placing loans in default despite the fact that the borrower was paying off the loan as agreed upon. Estimating that approximately 90% of private student loans were co-signed in 2011, the CFPB noted that it has been receiving reports that borrowers are automatically put in default upon the death or bankruptcy of co-signers on the loan. In response to this, the report described several alternatives to such “auto-defaults”, including conducting an assessment of the borrower for co-signer release and maintaining the existing payment schedule, affording the borrower the opportunity to identify a new co-signer, or allowing the borrower time to refinance the loan.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

Topics:  CFPB, Cosigners, Default, Student Loans

Published In: Consumer Protection Updates, Education Updates, Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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