December 27, 2013 | By RGR Marketing Blog

 

 

 

In honor of adding student loan leads to our offerings as of  January 1st, we thought we'd share some knowledge about how the CFPB is protecting borrowers and let you know we are 100% compliant with the bureau to ensure you only get the highest quality leads.

 

 

 

 

 

 

 

As of March, 2014, student loan borrowers will benefit from the supervision of their loan servicers by the Consumer Financial Protection Bureau (CFPB)

What This Means - Widening the Umbrella

The CFPB are already responsible for the examination of banks that offer student loan services, but now they will supervise nonbank student loan servicers to ensure that the organizations are compliant with federal law.

The bureau will look at large servicers who provide student debt services for more than 1 million consumers. It estimates that the top 7 servicers will come under its watchful eye which means that some 49 million consumers could be affected by the new rule.

Trillions in Debt

It’s reported that the amount of money owed through student loans is around $1.2 trillion and approximately 7 million debtors are currently in default on their debt. There are concerns that some glitches in servicers’ procedures may be negatively affecting the consumer resulting in unnecessary fees which are further contributing to the amount of debt that US citizens are in. Consumers have spoken up about the following problems with their own servicers:

  • Divided payments – If a borrower has more than one loan out and they know that they can’t reach the minimum payment for all loans, they are advised to make a payment of whatever they can afford. The idea is to reach at least the minimum on the primary debt and then as much as possible for the next (if there is any money left over) and so on. However some borrowers complained that their servicers were distributing their partial payments across all loans evenly which actually led to the borrower incurring more fees due to none of the minimum payments being reached.
  • Non-seamless servicing transfers – Some borrowers said that when they transferred their loans between servicers they experienced delays in the process through lost paperwork etc. as well as wildly varying payment policies which caused confusion for the borrower. It seems that many borrowers didn’t understand the new payment policies and were penalized because of their confusion. The CFPB would hope to ensure that student loan servicers are a lot more transparent to avoid such confusion and reduce the fees associated with it for the consumer.
  • Prepayment confusion – One of the best ways to avoid paying more than necessary in interest on a loan, borrowers could try to pay their balance off sooner than the lifetime of the loan. Many people choose to try and pay off the loans with the highest interest rate quickly by paying more than the minimum. But some consumers were concerned when servicers divided the excess money over all of the loans evenly.

Improving Communication

The CFPB’s supervision will hopefully have a positive impact on the customer service of the student loan servicers from a consumer’s point of view. Communication should be clearer when outlining the lenders policies on prepayment, partial payments etc.

One in five homes across America have student loans that are directly affected by these kinds of student loan servicers. Director of the bureau, Richard Cordray explained the importance of borrowers gaining regularity and clarification from their servicers: “As the recession decimated the job market for young graduates, a growing share of student loan borrowers reached out to their servicers for help," Cordray said. "The problems they have encountered bear a striking resemblance to the problems faced by homeowners in the run-up to the financial crisis.”

Borrowers can give their own account of any problems with servicers at the CFPB website to help the bureau combat the inconsistencies with servicers and hopefully have a positive impact on the amount of student debt across the nation.

If you're interested in finding out how debt settlement companies are moving into the student loan consolidation space. Give us a call, we'd be happy to answer your questions.

 

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