[Federal Register Volume 80, Number 98 (Thursday, May 21, 2015)]
[Notices]
[Pages 29302-29312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12276]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

[Docket No. CFPB-2015-0021]


Request for Information Regarding Student Loan Servicing

AGENCY: Bureau of Consumer Financial Protection.

[[Page 29303]]


ACTION: Notice and request for information.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB) 
is seeking comments from the public related to the market for student 
loan servicing. The submissions to this request for information will 
serve to assist market participants and policymakers on potential 
options to improve borrower service, reduce defaults, develop best 
practices, assess consumer protections, and spur innovation.

DATES: Comments must be received on or before July 13, 2015.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2015-
0021, by any of the following methods:
     Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
     Email: [email protected]. Include Docket 
No. CFPB-2015-0021 in the subject line of the message.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.

    Instructions: All submissions should include the agency name and 
docket number for this proposal. Because paper mail in the Washington, 
DC area and at the Bureau is subject to delay, commenters are 
encouraged to submit comments electronically. In general, all comments 
received will be posted without change to http://www.regulations.gov. 
In addition, comments will be available for public inspection and 
copying at 1275 First Street NE., Washington, DC 20002, on official 
business days between the hours of 10 a.m. and 5 p.m. eastern standard 
time. You can make an appointment to inspect the documents by 
telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments generally will not 
be edited to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: For general inquiries, submission 
process questions or any additional information, please contact Monica 
Jackson, Office of the Executive Secretary, at 202-435-7275.

SUPPLEMENTARY INFORMATION: The Consumer Financial Protection Bureau is 
engaged in a joint effort with the U.S. Department of Education and the 
U.S. Department of the Treasury to identify initiatives to strengthen 
student loan servicing. This request seeks comments related to the 
critical role that servicing plays in facilitating repayment of student 
loans, in order to improve customer service, identify innovative 
practices and business models, and assess the current framework that 
exists regarding the consumer protection for student loan borrowers in 
repayment.
    The submissions to this request for information may serve to assist 
federal and state agencies in prioritizing resources and to assist 
financial services providers in developing best practices. The public 
comments may also be used to inform a report required by a Presidential 
Memorandum signed on March 10, 2015.\1\
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    \1\ The White House, Presidential Memorandum--Student Aid Bill 
of Rights (March 10, 2015), available at https://www.whitehouse.gov/the-press-office/2015/03/10/presidential-memorandum-student-aid-bill-rights.
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    The deadline for submission of comments is July 13, 2015.
    The Bureau encourages comments from the public, including:
     Student loan borrowers;
     Organizations representing students and student loan 
borrowers;
     Innovators, technology providers, and recent entrants into 
the student loan market;
     Institutions of higher education and affiliated parties;
     Financing services providers, including but not limited to 
lenders and servicers in the mortgage, credit card, and student loan 
markets;
     Trust administrators of student loan asset-backed 
securities;
     Credit reporting agencies;
     Debt collectors;
     Organizations promoting financial education;
     Civil rights groups; and
     Nationally recognized statistical rating organizations.
    Please note that the Bureau is not soliciting individual student 
account information in response to this notice and request for 
information, nor is the Bureau seeking personally identifiable 
information (PII) regarding student accounts from the parties or any 
third party.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or social 
security numbers, should not be included. Comments generally will not 
be edited to remove any identifying or contact information.

Part A: Issues Related to Student Loan Repayment

The Student Loan Market

    In the last decade, the student loan market has undergone rapid 
growth and change. Today, the Consumer Financial Protection Bureau (the 
Bureau) estimates that there are over 40 million borrowers with student 
loans who collectively owe over $1.2 trillion.\2\ Student debt is the 
largest category of unsecured debt owed by American consumers.
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    \2\ U.S. Department of Education, Federal Student Aid Portfolio 
Summary, Data Center: Federal Student Loan Portfolio, accessed on 3/
30/2015, available at https://studentaid.ed.gov/about/data-center/student/portfolio; Consumer Financial Protection Bureau and U.S. 
Department of Education, Private Student Loans (2012), available at 
http://www.consumerfinance.gov/reports/private-student-loans-report/
; and U.S. Department of Education, Federal Student Aid Annual 
Report 2014 (2014), available at http://www2.ed.gov/about/reports/annual/2014report/fsa-report.pdf.
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    Compared to other large markets of consumer financial products 
(such as residential mortgages and credit cards),\3\ availability of 
market data is quite limited, particularly for private student loans, 
which grew rapidly in the years leading up to the financial crisis.\4\ 
Based on the Bureau's analysis of various sources, such as consumer 
credit panels, audited financial statements, and consumer surveys, both 
the number and proportion of student loan borrowers in a repayment 
status has grown.
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    \3\ For example, under the Home Mortgage Disclosure Act, most 
loan-level mortgage application, origination, and purchase data is 
currently subject to public disclosure, stripped of certain 
information to protect borrower privacy. The CFPB developed and 
maintains a web tool to allow the public to access and analyze HMDA 
data. See Consumer Financial Protection Bureau, The Home Mortgage 
Disclosure Act, available at http://www.consumerfinance.gov/hmda. In 
addition, data from housing GSEs and mortgage-backed securities 
filings shed significant light on loan-level performance. The Office 
of the Comptroller of the Currency regularly publishes a mortgage 
metrics report, detailing loan modification performance and other 
key servicing data. See, for example, Office of the Comptroller of 
the Currency, Mortgage Metrics Report for 2014 Q4 (March 2015), 
available at http://www.occ.gov/publications/publications-by-type/other-publications-reports/mortgage-metrics/mortgage-metrics-q4-2014.pdf.
    \4\ Consumer Financial Protection Bureau and U.S. Department of 
Education, Private Student Loans (2012), available at http://www.consumerfinance.gov/reports/private-student-loans-report/.

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[GRAPHIC] [TIFF OMITTED] TN21MY15.012

    While the features and borrower characteristics of each type of 
student loan may vary, the three major types of student loans currently 
outstanding, as described below, are generally serviced by the same 
market participants.
    The three main types of post-secondary education loans under which 
borrowers have outstanding balances are loans made under the Federal 
Family Education Loan program (FFELP), loans made under the William D. 
Ford Federal Direct Loan (Direct Loan) program, and private student 
loans. Direct Loans and private student loans are still available for 
new originations.\6\
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    \5\ U.S. Department of Education, Federal Student Aid Annual 
Report (2007-2014), available at http://www2.ed.gov/about/reports/annual/index.html.
    \6\ There are additional Federal programs under Title IV which 
also authorize student loans. For example, one such program finances 
loans made directly by certain post-secondary education institutions 
through their financial aid offices. See 20 U.S.C. 1087aa et seq. 
Another offers grants to those who pledge to become teachers. If the 
recipients do not become teachers, then the disbursed funds are 
converted from grants to loans. See 20 U.S.C. 1070g et seq.
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    Federal Family Education Loans: More than $380 billion \7\ in 
outstanding student loans were made under FFELP.\8\ While FFELP loans 
were generally originated using private capital, they were guaranteed 
by a governmental or not-for-profit entity, and reinsured by the 
Federal government. These loans are serviced either by the loan holders 
themselves or by a third-party student loan servicer pursuant to 
contracts with the loan holders. A noteworthy portion of these loans 
serve as collateral for asset-backed securities.\9\ Pursuant to the 
2010 SAFRA Act, the origination of new guaranteed loans under FFELP was 
suspended.
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    \7\ U.S. Department of Education, Federal Student Aid Portfolio 
Summary, Data Center: Federal Student Loan Portfolio, accessed on 5/
6/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio.
    \8\ 20 U.S.C. 1078(b), (c).
    \9\ See, for example, Sallie Mae, SLM Corporation: Overview of 
FFELP and FFELP ABS Transactions (June 18, 2012), available at 
https://www.navient.com/assets/about/investors/webcasts/2012FFELPOverviewvFinal.pdf.
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    Federal Direct Loans: Pursuant to SAFRA, the Department of 
Education shifted primarily to direct lending, providing loans directly 
to borrowers under the William D. Ford Federal Direct Loan program.\10\ 
As of the end of calendar year 2014, 28.5 million borrowers 
collectively owed approximately $744 billion in outstanding Direct 
Loans.\11\ Direct Loans are serviced by third parties that contract 
with the Department of Education pursuant to Title IV of the Higher 
Education Act (HEA).\12\ Preceding the suspension of new FFELP 
originations, many of the FFELP student loan servicers were awarded 
servicing contracts to begin servicing loans held by the Department of 
Education, including loans made under the Direct Loan program.\13\
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    \10\ See Public Law 111-152, secs. 2101-2213, 124 Stat. 1071 
(2010). The Direct Loan Program actually began in 1992, see Public 
Law 102-325, 106 Stat. 569 (1992), but Federal Direct loans 
constituted only a small portion of Federal student lending before 
the enactment of the SAFRA Act in 2010.
    \11\ U.S. Department of Education, Federal Student Aid Portfolio 
Summary, Data Center: Federal Student Loan Portfolio, accessed on 5/
7/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio.
    \12\ 20 U.S.C. 1087f(b).
    \13\ In 2008, the enactment of the Ensuring Continued Access to 
Student Loans Act (ECASLA) authorized the Secretary of Education to 
take extraordinary measures to ensure students could continue to 
borrow amid turmoil in the capital markets. Under this authority, 
the Department of Education acquired a large volume of loans made by 
private lenders through FFELP and assigning the servicing to certain 
third parties. See Pub. L. 110-227; following the termination of the 
FFEL program, third-party servicers were awarded additional Direct 
Loan volume through this contract. For further discussion, see U.S. 
Department of Education, Loan Servicing Update (July 2012) available 
at www.ifap.ed.gov/presentations/attachments/NASFAA2012LoanServicingUpdate.ppt.
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    Private Student Loans: The student loan market includes private 
student loans, which are not originated pursuant to Title IV of the 
HEA. Most private student loans are typically originated by very large 
depository institutions and specialty student loan companies. A 
substantial portion of private student loans serve as collateral for 
asset-backed securities. The market for private student loans is 
opaque, as market participants generally do not make available key 
origination and performance information, and reporting requirements on 
outstanding balances and performance are extremely limited.
    The vast majority of student loan servicing activity is now 
concentrated among large student loan servicers that service all three 
types of student loans.\14\
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    \14\ For further discussion of student loan servicing market 
composition, see Consumer Financial Protection Bureau, Final Rule: 
Defining Larger Participants of the Student Loan Servicing Market 
(December 2013), available at http://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf.
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The Student Loan Servicing Business Model

    More than 40 million Americans with student loan debt depend on 
student loan servicers as their primary point of contact for their 
student loans. A servicer is often different than the lender or loan 
holder, and borrowers almost always lack control or choice over which 
company services their loan. Student loan servicers' duties typically 
include managing borrowers' accounts, processing monthly payments, and 
communicating directly with borrowers.\15\ These duties may also

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include informing borrowers about loan repayment options and 
facilitating enrollment in alternative repayment plans and other 
benefits, including options to assist federal student loan borrowers 
experiencing financial hardship.\16\
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    \15\ The Bureau defined student loan servicing as (1) receiving 
loan payments (or receiving notification of payments) and applying 
payments to the borrower's account pursuant to the terms of the 
post-secondary education loan or of the contract governing the 
servicing; (2) during periods when no payments are required, 
maintaining account records and communicating with borrowers on 
behalf of loan holders; or (3) interactions with borrowers, 
including activities to help prevent default, conducted to 
facilitate the foregoing activities. See 12 CFR 1090.106.
    \16\ See, for example, 20 U.S.C. 1098e.
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    When problems arise because of servicing problems, student loan 
borrowers may face a range of different consequences. They may miss a 
payment, owe more money because of additional interest on principal, or 
face future difficulties with credit because of a poor payment history.
    For the majority of student loan borrowers who make payments on 
time each month and never contact their servicer for additional 
assistance, loan servicing generally may be limited to accepting and 
applying monthly payments and awarding benefits earned by satisfying 
specific loan terms (e.g. interest rate reductions for enrolling in 
auto-debit or making a series of on-time monthly payments). These 
borrowers also depend on their student loan servicers to accurately 
report their payment history to the credit bureaus. Adequate student 
loan servicing is critical for these borrowers to establish a good 
credit history through their timely student loan payments, in order to 
ensure that they are positioned to participate fully in the marketplace 
for other financial products and services.\17\
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    \17\ In addition, certain consumer protections included in Title 
IV of the Higher Education Act require student loan borrowers to 
remit on-time monthly payments under certain repayment arrangements 
in order to obtain loan forgiveness. These repayment arrangements 
may require student loan servicers to certify income documentation 
on an annual basis in order for borrowers to obtain the maximum 
benefit. In some cases, loan forgiveness is also contingent upon 
certain types of employment. Student loan servicers are responsible 
for evaluating the timeliness of monthly payments, evaluating 
whether employment qualifies a borrower for certain benefits and 
applying these benefits to borrowers' accounts. Depending on the 
program, high-quality student loan servicing over a period of 5, 10, 
20 or 25 years is critical for these borrowers to realize benefits 
provided by statute. See, for example, 20 U.S.C. 1078-10 and 20 
U.S.C. 1087e(m).
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    Student loan borrowers facing unemployment or other financial 
hardship need adequate loan servicing for a different reason. Student 
loan servicers assist these borrowers with enrolling in alternative 
repayment plans, obtaining deferments or forbearances, or requesting a 
modification of loan terms. For these borrowers, proper loan servicing 
may be the key to successfully avoid default and ultimately perform on 
the loan. When borrowers face difficulties, loan servicers can help 
borrowers avoid default, minimize damage to borrowers' credit, and 
ensure that borrowers can find sustainable solutions that keep them on 
a long-term path to future financial success. In addition, adequate 
loan servicing also helps to ensure that owners of the loans are 
repaid.

Financial Incentives for Student Loan Servicers

    The Bureau estimates that there are nearly 8 million student loan 
borrowers in default, representing over $110 billion in balances.\18\ 
In addition, the Department of Education estimates that another 3 
million Direct Loan borrowers are at least 30 days past due on one or 
more student loans, comprising over $58 billion in balances.\19\ As the 
number of borrowers with defaulted or delinquent student loans has 
grown,\20\ it has prompted questions about what steps servicers should 
take to achieve greater success in minimizing defaults and curing 
delinquencies. For example, it appears that few, if any, private 
student lenders and loan servicers have developed transparent, widely-
offered flexible repayment options to mitigate defaults for borrowers 
in distress.\21\
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    \18\ As of the first quarter of FY15, 7.3 million federal 
student loan borrowers were in default on more than $106 billion in 
federal student loans. See, U.S. Department of Education, Federal 
Student Aid Portfolio Summary, Data Center: Federal Student Loan 
Portfolio, accessed on 5/7/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio; According to 
a 2012 study of the private student loan market published by the 
U.S. Department of Education and the Consumer Financial Protection 
Bureau, 850,000 private student loans with an outstanding principal 
balance of over $8 billion were in default. See U.S. Department of 
Education and Consumer Financial Protection Bureau, Private Student 
Loans (2012), available at http://www.consumerfinance.gov/reports/private-student-loans-report/.
    \19\ U.S. Department of Education, Federal Student Aid Portfolio 
Summary, Data Center: Federal Student Loan Portfolio, accessed on 3/
30/2015, available at: https://studentaid.ed.gov/about/data-center/student/portfolio.
    \20\ Consumer Financial Protection Bureau, A closer look at the 
trillion (August 5, 2013), available at http://www.consumerfinance.gov/blog/a-closer-look-at-the-trillion/.
    \21\ Consumer Financial Protection Bureau, Annual Report of the 
CFPB Student Loan Ombudsman (2014), available at http://files.consumerfinance.gov/f/201410_cfpb_report_annual-report-of-the-student-loan-ombudsman.pdf.
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    While federal student loans feature an array of flexible repayment 
options, it is not clear whether third-party student loan servicers, 
particularly those servicing Federal Family Education Loans, have 
adequate economic incentive to enroll borrowers in these options to 
avoid default. For both private and federal student loans, the 
compensation model used in most third-party servicing contracts 
provides student loan servicers with a flat monthly fee per account 
serviced.\22\ Although this fee may adjust based on a loan's repayment 
status, fees are generally fixed on a monthly basis and do not rise or 
fall depending on the level of service a particular borrower requires 
in a given month.
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    \22\ This monthly servicing fee may be set as a flat dollar 
amount per month per account, or set based on a percentage of a 
borrower's aggregate principal balance. In both cases, the fee paid 
to student loan servicers may vary depending on repayment status but 
generally do not vary depending on the level of service provided in 
a given month. See, for example, First Marblehead Corporation, 
Prospectus Supplement: The National Collegiate Student Loan Trust 
2007-3 (September 17, 2007), available at http://www.snl.com/interactive/lookandfeel/4094003/NCSLT_2007_3_FPS.PDF and U.S. 
Department of Education, Title IV Redacted Contract Awards 12-13, 
available at https://www.fbo.gov/spg/ED/FSA/CA/FSA-TitleIV-09/listing.html. Contracts fix monthly compensation on a per-borrower 
basis, and the compensation depends on the repayment status of each 
borrower being serviced. See also U.S. Department of Education, 
Student Aid Administration Fiscal Year 2015 Request, at AA-15, 
available at http://www2.ed.gov/about/overview/budget/budget15/justifications/aa-saadmin.pdf. This estimates the average cost per-
borrower to be $1.67 per month, based on the contractual prices and 
the proportion of borrowers with different repayment statuses.
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The Regulatory Landscape for Student Loan Servicing

    In recent years, policymakers have undertaken broad-based 
legislative and regulatory efforts to strengthen applicable federal 
consumer financial laws protecting consumers in the servicing of 
mortgages and credit cards. For student loan borrowers, there is no 
existing, comprehensive federal statutory or regulatory framework 
providing uniform standards for the servicing of all student loans.\23\ 
However, there are limited protections for certain federal student loan 
borrowers related to certain aspects of the repayment process.\24\
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    \23\ In 2014, the Bureau expanded its examination program for 
student loan servicing to supervise both large depository 
institutions and larger nonbank student loan servicers for 
compliance with federal consumer law, including the prohibition 
against unfair, deceptive and abusive practices under the Dodd-Frank 
Act. This is the first examination program at the federal level 
focused on both bank and nonbank actors in the student loan 
servicing market. See Consumer Financial Protection Bureau, 
Education Loan Examination Procedures (December 2013), available at 
http://files.consumerfinance.gov/f/201312_cfpb_exam-procedures_education-loans.pdf.
    \24\ See, e.g., 34 CFR part 682 for certain disclosures and 
other requirements for companies servicing FFELP loans.
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    There may be variation in the level of service delivered by student 
loan

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servicers depending on the type of loan borrowed, the identity of 
lender, or the company selected to service the loan. The statutory and 
regulatory framework for student loan servicing, and the gaps in that 
framework, may contribute to this variation.

Higher Education Act of 1965 (HEA)

    Title IV of HEA authorizes the federal student loan programs and 
establishes a framework for conduct by and oversight of companies 
participating in FFELP, including student loan servicers contracted by 
holders of FFELP loans to service these loans. This framework 
establishes a number of conditions that loan holders and service 
providers must meet in order for federal loan guarantees to remain in 
effect, including arranging for periodic independent financial audits 
and complying with program requirements established in implementing 
regulations.\25\
    Congress has amended Title IV of HEA periodically since its 
enactment, creating a set of flexible repayment plans, loan 
cancellation options, and other protections for borrowers with federal 
student loans.\26\ Student loan servicers are responsible for 
administering these benefits and protections. In addition, these 
amendments have expanded the extraordinary collection tools available 
to recover defaulted federal student loans, including extra-judicial 
wage garnishment, tax refund offset, and seizure of federal payments, 
such as certain benefits administered by the Social Security 
Administration.\27\
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    \25\ See, e.g., 34 CFR 682.401; 682.416. In addition, HEA 
establishes a number of conditions related to the origination of 
federal student loans, including specific requirements related to 
disclosure and counseling at the time of origination and prior to 
entering repayment.
    \26\ See, for example, Pub. L. 110-84.
    \27\ For example, the Higher Education Technical Amendments of 
1991 eliminated the statute of limitations for lawsuits to collect 
of federal student loan debt. See Pub. L. 102-26. In addition, a 
number of other federal laws govern the collection of debts owed to 
the federal government. See, for example, Pub. L. 104-134.
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Amendments to the Higher Education Act Included in the Higher Education 
Opportunity Act (HEOA) of 2008

    In 2008, Congress enacted HEOA, reauthorizing HEA and amending 
Title IV to provide additional protections for borrowers with loans 
made through FFELP. Implementing regulations require student loan 
servicers to provide certain notices to borrowers with FFELP loans 
during the course of repayment, including notices related to account 
terms, repayment plans, and servicing transfers.\28\ These regulations 
create basic compliance requirements as a precondition for student loan 
servicers to maintain eligibility to participate in FFELP.
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    \28\ See Pub. L. 110-315. For example, servicers must provide 
borrowers with a notice of servicing transfer containing information 
about the new servicer 45 days after the effective date of 
transfer--a protection that has been triggered for more than 10 
million student loan borrowers since 2010. This requirement of 
notice does not require any notice to the borrower prior to the 
effective date of transfer. In contrast, protections offered to 
mortgage borrowers under the Real Estate Settlement Procedures Act 
(RESPA) requires notice of a servicing transfer 15 days prior to and 
15 days after the effective date of transfer.
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Amendments to the Truth in Lending Act (TILA) Included in HEOA

    HEOA also amended TILA to create new protections for borrowers with 
private education loans, largely related to the origination of these 
loans.\29\ These protections include safeguards to mitigate the risk 
that private student lenders will extend credit to borrowers to cover 
expenses beyond the total cost of attendance and requirements for 
schools entering into preferred lender arrangements with lenders 
seeking to market private loans to students.\30\
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    \29\ Pub. L. 110-315, 15 U.S.C. 1650.
    \30\ TILA and its implementing regulation, Regulation Z, 
explicitly exempt credit extended pursuant to Title IV of the Higher 
Education Act from requirements established for private education 
loans. See 15 U.S.C. 1650a(7)(A)(i).
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Fair Credit Reporting Act (FCRA)

    FCRA and its implementing regulation, Regulation V, require 
entities that furnish information to consumer reporting agencies to 
have reasonable policies and procedures regarding the accuracy and 
integrity of information they furnish.\31\ While furnishing is 
generally a voluntary activity,\32\ federal student loan servicers have 
an affirmative duty to furnish. Title IV of HEA requires that certain 
participants in the student loan market furnish information about 
federal student loans to consumer reporting agencies.\33\
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    \31\ See 15 U.S.C. 1681-1681x; and 12 CFR part 1022.
    \32\ See 15 U.S.C. 1681s and 12 CFR part 1022, App. E (``The 
Bureau encourages voluntary furnishing of information to consumer 
reporting agencies.'').
    \33\ See, for example, 20 U.S.C. 1080a.
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Risks for Consumers Repaying Student Loan Debt

    In July 2011, the Bureau launched an examination program to 
supervise education lending and servicing at the largest depository 
institutions.\34\ In December 2013, the Bureau finalized a rule 
expanding its supervisory authority to include large nonbank 
participants in the student loan servicing market--the companies that 
perform more than 70 percent of all nonbank student loan servicing 
activity, including those student loan servicers contracted by the 
Department of Education to service the federally-owned loan 
portfolio.\35\ Nonbank entities perform the vast majority of student 
loan servicing activity.\36\ Historically, these entities have not been 
subject to federal or state licensing requirements or supervision for 
compliance with federal consumer protection laws.
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    \34\ In December 2012, the Bureau published the examination 
procedures used in examinations of student lending at these 
institutions. See Consumer Financial Protection Bureau, CFPB 
Releases Exam Procedures for Student Loans (2012), available at 
http://www.consumerfinance.gov/newsroom/consumer-financial-protection-bureau-releases-exam-procedures-for-student-loans/.
    \35\ Consumer Financial Protection Bureau, Final Rule: Defining 
Larger Participants of the Student Loan Servicing Market (December 
2013), available at http://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf.
    \36\ For further discussion of student loan servicing market 
composition, see Consumer Financial Protection Bureau, Final Rule: 
Defining Larger Participants of the Student Loan Servicing Market 
(December 2013), available at http://files.consumerfinance.gov/f/201312_cfpb_student-servicing-rule.pdf.
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    In October 2011, the Secretary of the Treasury designated a student 
loan ombudsman within the Bureau, pursuant to the Dodd-Frank Wall 
Street Reform and Consumer Protection Act (Dodd-Frank Act). The 
Bureau's student loan ombudsman is required to submit certain reports 
to the Director of the Bureau, the Secretary of the Treasury, and the 
Secretary of Education related to student loan complaints.\37\ These 
reports have focused on private student loans and highlighted a range 
of consumer complaints submitted to the Bureau regarding servicing 
issues, including:
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    \37\ See 12 U.S.C. 5535. In addition, the Higher Education Act 
established a Student Loan Ombudsman at the U.S. Department of 
Education to assist borrowers with federal student loans. See 20 
U.S.C. 1018.
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     Payment posting: Some consumers have reported that it 
takes servicers several days to process payments and servicers may 
charge interest on the outstanding principal during that processing 
time. Consumers have complained that servicers may also apply payments 
to an account well after they debit funds from a borrower's bank 
account. Consumers note that some servicers may take several days to 
process payments submitted online, when other financial services 
companies are able to credit such payments upon receipt.
     Processing prepayments: Consumers may attempt to prepay 
their

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loans in order to reduce the amount of interest owed over the life of 
the loan. But many consumers have expressed confusion about how to pay 
off their loans early. For example, borrowers have complained that 
servicers apply payments in excess of the amount due across all their 
loans, not to the highest-interest rate loan that they would prefer to 
pay off first. These processing problems may result from insufficient 
investment in a servicing platform's information technology 
infrastructure.
     Processing partial payments: When consumers have multiple 
loans with one servicer and are unable to pay all of the loans on their 
bill in full, borrowers have reported that many servicers instruct them 
to make whatever payment they can afford. Many complaints have 
described how servicers often divide up the partial payment and apply 
it evenly across all of the loans in their account. This may maximize 
the late fees charged to the consumer.
     Paperwork and account information: Consumers have reported 
experiencing lost paperwork submitted to process applications for 
forbearance or alternative payment plans. Borrowers have reported that 
servicers do not correct errors in a timely fashion. Consumers have 
also reported encountering limited access to basic account information, 
including their payment history. Some borrowers have reported 
difficulty when seeking to determine how their payments have been 
applied to interest and principal, particularly when loans are grouped 
together for billing purposes.
     Servicing transfers: Consumers have noted many servicing 
interruptions following a change in servicer. Many of these consumers 
were unaware that their loans had been transferred to a new servicer 
until the point at which they encountered a problem. Consumers have 
explained that, following a change in servicer, they experience 
interruptions when receiving billing statements, notices, or other 
routine communications. Consumers have also noted that they were 
charged late fees because borrowers mailed their payments to their old 
servicers. Consumers have complained that, in some cases, servicers did 
not process payments correctly post-transfer, if the consumer mailed a 
check to the new servicer containing account information from the old 
servicer.
     Customer service: Consumers have complained that servicing 
personnel may not be adequately trained to provide assistance or may be 
unaware of resources available to borrowers in distress. This problem 
may be exacerbated at companies that service many different loan 
portfolios for third-party lenders. Consumers have reported that 
servicers transferred them to multiple departments, and, in some cases, 
none were responsive or empowered to provide a clear answer. Consumers 
have also complained about being unable to reach appropriate service 
staff members to correct a mistake in how a payment was applied to 
their account. Other consumers have complained about conflicting 
instructions from different employees of the same servicer.
     Repayment incentives: It is common for lenders to offer 
various incentives to borrowers in marketing materials prior to 
origination. These might include interest rate or principal reductions 
for engaging in activities that increase the likelihood of repayment, 
such as graduation or enrollment in an auto-debit program. But 
consumers have complained that some servicers place unexpected 
obstacles when borrowers seek to apply these benefits.
     Issues related to co-signers, including acceleration of 
performing loans: Consumers identify a range of issues specific to co-
signed student loans, including problems related to access to basic 
account information for co-signers and problems related to co-signer 
release, an advertised benefit of many private loans that some 
consumers find is prohibitively complicated to obtain. In addition, 
many consumers assume that the death of a co-signer, often a parent or 
grandparent, will result in the release of the co-signer's obligation 
to repay. But many private student loan contracts include provisions 
that have been interpreted to provide the lender with the option to 
immediately demand the full loan balance upon death of the co-signer. 
Many private student loan contracts also include provisions that have 
been interpreted to allow the lender to place a loan in default if the 
borrower's co-signer files for bankruptcy.
    Borrowers have submitted complaints detailing how they face loan 
acceleration, including consequences such as credit damage and frequent 
debt collection calls, even if the loan was in good standing prior to 
and while the co-signer is in bankruptcy, or upon a co-signer's death. 
Acceleration may be triggered when data from probate and other court 
record scans are matched with a company's customer database, without 
regard to whether the borrower is in good standing.
     Benefits for members of the military: Servicemembers have 
identified problems they encountered when accessing the protections 
granted to them under federal rules, including the Servicemembers Civil 
Relief Act (SCRA). The hurdles they describe range from not being able 
to get the information they need, to being met with roadblocks when 
they do try to pursue their benefits.
    As noted in these reports, consumer complaints are not necessarily 
representative of typical experiences of student loan borrowers. 
However, examination and investigative activities have revealed that 
problems may not be limited to individual consumers filing complaints. 
For example, in 2014, the Federal Deposit Insurance Corporation (FDIC) 
addressed alleged misconduct with one large student loan servicer for 
illegal practices regarding student loan payment processing.\38\ The 
FDIC found violations of a federal law prohibiting unfair and deceptive 
practices with regard to student loan borrowers through the servicer's 
following actions:
---------------------------------------------------------------------------

    \38\ Federal Deposit Insurance Corporation, FDIC Announces 
Settlement with Sallie Mae for Unfair and Deceptive Practices and 
Violations of the Servicemembers Civil Relief Act (May 2014), 
available at http://www.fdic.gov/news/news/press/2014/pr14033.html.
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     Inadequately disclosing its payment allocation 
methodologies to borrowers while allocating borrowers' underpayments 
across multiple loans in a manner that maximizes late fees; and
     Misrepresenting and inadequately disclosing in its billing 
statements how borrowers could avoid late fees.
    In addition, the Department of Justice joined with the FDIC to 
enter an order providing $60 million in restitution for more than 
60,000 servicemembers in an action against the same company, related to 
its awarding of benefits under the SCRA to active duty members of the 
military.\39\ The FDIC found illegal conduct, including:
---------------------------------------------------------------------------

    \39\ See Federal Deposit Insurance Corporation, FDIC Announces 
Settlement with Sallie Mae for Unfair and Deceptive Practices and 
Violations of the Servicemembers Civil Relief Act (May 2014), 
available at http://www.fdic.gov/news/news/press/2014/pr14033.html; 
and U.S. Department of Justice, United States v. Navient Solutions, 
Inc., Navient DE Corporation and Sallie Mae Bank (May 2014), 
available at http://www.justice.gov/crt/about/hce/documents/salliecomp.pdf.
---------------------------------------------------------------------------

     Unfairly conditioning receipt of benefits under the SCRA 
upon requirements not found in the law;
     Improperly advising servicemembers that they must be 
deployed in order to receive benefits under the SCRA; and
     Failing to provide complete SCRA relief to servicemembers 
after having been put on notice of these borrowers' active duty status.
    While supervising for compliance with federal consumer financial 
laws,

[[Page 29308]]

the Bureau has also identified illegal practices through its 
examination program. Bureau examiners found one or more student loan 
servicers were: \40\
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    \40\ See Consumer Financial Protection Bureau, Supervisory 
Highlights: Fall 2014 (2014), available at http://www.consumerfinance.gov/reports/supervisory-highlights-fall-2014.
---------------------------------------------------------------------------

     Misrepresenting minimum payments: Bureau examiners found 
that one or more servicers inflated the minimum payment that was due on 
periodic statements and online account statements. These inflated 
numbers included amounts that were in deferment and not actually due.
     Charging improper late fees: CFPB examiners found one or 
more servicers were unfairly charging late fees when payments were 
received during the grace period. Like many other types of loans, many 
student loan contracts have grace periods after the due date. If a 
payment is received after the due date, but during the grace period, 
the promissory note stated that late fees would not be charged.
     Failing to provide accurate tax information: CFPB 
examiners found cases where student loan servicers failed to provide 
consumers with information essential for deducting student loan 
interest payments on their tax filings. The servicers impeded borrowers 
from accessing this information and misrepresented information on the 
consumers' online account statements. This practice may have caused 
some consumers to lose up to $2,500 in tax deductions.
     Misleading consumers about bankruptcy protections: CFPB 
examiners found that some servicers told consumers student loans are 
not dischargeable in bankruptcy. While student loans are more difficult 
to discharge in bankruptcy than most other types of loans, it is 
possible to discharge a student loan if the borrower affirmatively 
asserts and proves ``undue hardship'' in a court. Servicer 
communications with borrowers asserted or implied that student loans 
were never dischargeable.
     Making illegal debt collection calls to consumers at 
inconvenient times: Examiners found that one or more student loan 
servicers routinely made debt collection calls to delinquent borrowers 
early in the morning or late at night. For example, examiners 
identified more than 5,000 calls made at inconvenient times during a 
45-day period, which included 48 calls made to one consumer.

Presidential Memorandum on a Student Aid Bill of Rights

    On March 10, 2015, the President signed a Presidential Memorandum 
titled the ``Student Aid Bill of Rights.'' \41\ The memorandum was 
addressed to the Secretary of the Treasury, Secretary of Education, 
Commissioner of Social Security, Director of the Consumer Financial 
Protection Bureau, Director of the Office of Management and Budget, 
Director of the Office of Science and Technology Policy, and the 
Director of the Domestic Policy Council. The memorandum directed 
certain executive agencies to undertake a number of steps to improve 
student loan borrowers' experience in repayment, with a particular 
focus on enhancing student loan servicing. The memorandum requires the 
Secretary of Education, in consultation with the Secretary of the 
Treasury and the Director of the Consumer Financial Protection Bureau, 
to issue a report to the President ``after assessing the potential 
applicability of consumer protections in the mortgage and credit card 
markets to student loans, [on] recommendations for statutory or 
regulatory changes in this area, including, where appropriate, strong 
servicing standards.''
---------------------------------------------------------------------------

    \41\ The White House, Presidential Memorandum--Student Aid Bill 
of Rights (March 10, 2015), available at https://www.whitehouse.gov/the-press-office/2015/03/10/presidential-memorandum-student-aid-bill-rights/.
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Policymakers Have Established a Framework To Strengthen Servicing 
Protections for Mortgage and Credit Card Borrowers

    The Bureau has observed similarities between the servicing problems 
encountered by student loan borrowers and those experienced by 
borrowers with other financial products. Loan servicing generally 
includes many common functions, irrespective of the underlying consumer 
financial product, including account maintenance, billing and payment 
processing, customer service, and managing accounts for customers 
experiencing financial distress.\42\
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    \42\ There are also noteworthy differences between the servicing 
of mortgages, credit cards and student loans. These include but are 
not limited to differences related to the servicing of loans secured 
by real estate compared to unsecured loans, and practices unique to 
open-ended products with replenishing lines of credit, commonly used 
in repeated transactions.
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    During and in the wake of the financial crisis, Congress, state 
policymakers, law enforcement officials, and federal financial 
regulators sought to address a broad range of loan servicing problems 
in the credit card and mortgage markets. Several large mortgage 
servicers reached settlements with State and Federal regulators to 
address a range of troubling practices.\43\
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    \43\ For example, in 2012, the attorneys general of forty-nine 
states, the District of Columbia and the federal government reached 
an agreement with five large mortgage servicers to address mortgage 
loan servicing and foreclosure abuses. See U.S. Department of 
Justice, National Mortgage Settlement, available at http://www.justice.gov/ust/eo/public_affairs/consumer_info/nms/; In 
addition, there have been a number of cases of alleged improper 
treatment of military families, including cases where mortgage 
servicers conducted allegedly wrongful foreclosures in violation of 
the SCRA, See U.S. Department of Justice, Recent Accomplishments of 
the Housing and Civil Enforcement Division, available at http://www.justice.gov/crt/about/hce/whatnew.php (summarizing the 
enforcement actions concerning the Servicemember Civil Relief Act).
---------------------------------------------------------------------------

Mortgage Servicing

    Congress has passed several significant legislative and regulatory 
interventions to protect mortgage borrowers from illegal and deceptive 
mortgage servicing practices. In 1968 and 1974, Congress passed TILA 
and the Real Estate Settlement Procedures Act of 1974 (RESPA), 
respectively. Taken together, these statutes provide additional 
disclosure requirements and regulate certain acts associated with 
consumer risk and harm.\44\ TILA and RESPA also provide a private right 
of action and damages in certain circumstances for certain 
violations.\45\ Over the past nearly 50 years, Congress has amended 
both TILA and RESPA on numerous occasions to add additional protections 
for consumers.\46\
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    \44\ In addition to TILA and RESPA, Congress enacted the Home 
Ownership and Equity Protection Act (HOEPA) in 1994 as an amendment 
to TILA, establishing certain disclosures and protections related to 
high-cost mortgages. See Pub. L. 103-325.
    \45\ 15 U.S.C. 1640; 12 U.S.C. 2605.
    \46\ See CFPB Consumer Law and Regulations, RESPA Procedures--
TILA RESPA Integrated Disclosures (applicable for examinations after 
the August 2015 effective date), and Mortgage Servicing Requirements 
(January 2014), available at http://files.consumerfinance.gov/f/201503_cfpb_regulation-x-real-estate-settlement-procedures-act.pdf 
(summarizing amendments to RESPA); See also, CFPB Consumer Law and 
Regulations, TILA Procedures--TILA RESPA Integrated Disclosures 
(applicable for examinations after the August 2015 effective date), 
and Higher-Priced Mortgage Loan Appraisals (January 2014), Escrow 
Accounts (January 2014), and Mortgage Servicing Requirements 
(January 2014), available at http://files.consumerfinance.gov/f/201503_cfpb_truth-in-lending-act.pdf (summarizing amendments to 
TILA).
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    In 2010, Congress again intervened by providing additional 
protections through the Dodd-Frank Act. The Dodd-Frank Act gave the 
Bureau authority to promulgate regulations to implement new mortgage 
servicing protections following the wake of the financial crisis and 
granted the Bureau with rule-making, supervision, and enforcement

[[Page 29309]]

authority over covered financial institutions.\47\ The Bureau 
implemented a series of new rules to significantly improve consumer 
protections for mortgage borrowers.\48\ The rules address critical 
servicer practices including error resolution, prompt crediting of 
payments, and providing payoff statements. They also include 
requirements relating to servicer policies and procedures, early 
intervention for delinquent borrowers, continuity of contact, and 
procedures for evaluating and responding to loss mitigation 
applications. These rules protect consumers from detrimental actions by 
mortgage servicers and give consumers better tools and information when 
dealing with mortgage servicers. For example, the mortgage servicing 
rules include:
---------------------------------------------------------------------------

    \47\ Public Law 111-203.
    \48\ See CFPB Consumer Law and Regulations, RESPA Procedures--
TILA RESPA Integrated Disclosures (applicable for examinations after 
the August 2015 effective date), and Mortgage Servicing Requirements 
(January 2014), available at http://files.consumerfinance.gov/f/201503_cfpb_regulation-x-real-estate-settlement-procedures-act.pdf 
(summarizing amendments to RESPA); see also, CFPB Consumer Law and 
Regulations, TILA Procedures--TILA RESPA Integrated Disclosures 
(applicable for examinations after the August 2015 effective date), 
and Higher-Priced Mortgage Loan Appraisals (January 2014), Escrow 
Accounts (January 2014), and Mortgage Servicing Requirements 
(January 2014), available at http://files.consumerfinance.gov/f/201503_cfpb_truth-in-lending-act.pdf (summarizing amendments to 
TILA).
---------------------------------------------------------------------------

     Notice of transfer of loan servicing. If a lender or 
servicer transfers a loan's servicing to a new servicer, the prior 
servicer must provide a notice to the borrower no less than 15 days 
before the effective date of transfer, and the transferee servicer must 
provide a notice not more than 15 days after the effective date of 
transfer, with limited exceptions.\49\ In addition, during the 60-day 
period beginning on the effective date of transfer, the servicer cannot 
treat a consumer's payment as late for any purpose (and cannot charge a 
late fee) if the consumer has made a timely payment to the prior 
servicer.\50\
---------------------------------------------------------------------------

    \49\ 12 CFR 1024.33(b).
    \50\ 12 CFR 1024.33(c).
---------------------------------------------------------------------------

     Timely transfer of documents to new servicer. Mortgage 
servicers are required to maintain policies and procedures reasonably 
designed to facilitate the transfer of information during servicing 
transfers.\51\ These policies should be tailored to ensure timely 
transfer of all documents and information in the possession or control 
of the prior servicer relating to the transferred loan to the new 
servicer.
---------------------------------------------------------------------------

    \51\ 12 CFR 1024.38(a), (b)(4).
---------------------------------------------------------------------------

     Payoff statements. A servicer must provide a payoff 
statement, specifying the amount needed to pay the loan in full as of a 
particular date, within seven business days after receiving the 
consumer's written request.\52\
---------------------------------------------------------------------------

    \52\ 12 CFR 1026.36(c)(3).
---------------------------------------------------------------------------

     Error resolution procedures. Generally, mortgage servicers 
must respond to written notices from consumers asserting a servicing 
error, such as charges for late fees that the servicer lacks a 
reasonable basis to impose.\53\ Within five days of a mortgage servicer 
receiving a written notice of error, the servicer must provide a timely 
written response acknowledging receipt.\54\ Then the servicer must 
correct the error or conduct a reasonable investigation and provide a 
written notice that the error has been corrected or conduct a 
reasonable investigation and provide the borrower a written 
notification that no error has occurred, along with the rationale 
behind the determination, and a statement of the borrower's right to 
request documents relied upon by the servicer and information on how to 
request such documents.\55\
---------------------------------------------------------------------------

    \53\ 12 CFR 1024.35(a), (b).
    \54\ 12 CFR 1024.35(d).
    \55\ 12 CFR 1024.35(e).
---------------------------------------------------------------------------

     Continuity of contact. Mortgage servicers must maintain 
policies and procedures designed to assign designated personnel to 
respond to the consumer's inquiries, and, as applicable, assist the 
consumer with available loss mitigation options.\56\ This gives the 
delinquent consumers continuity of contact and the ability to access 
information about the mortgage without being transferred to multiple 
customer service representatives.
---------------------------------------------------------------------------

    \56\ 12 CFR 1024.40(a).
---------------------------------------------------------------------------

     Record retention. Mortgage servicers are required to 
retain certain records that document actions taken regarding the 
mortgage loan account until one year after the date the loan is 
discharged or servicing is transferred.\57\ Records required to be 
preserved include a schedule of all transactions debited or credited, 
any notes created by the servicer reflecting communications with the 
borrowers about the mortgage, and copies of any documents provided by 
the consumer to the servicer in accordance with error resolution or 
loss mitigation procedures.\58\
---------------------------------------------------------------------------

    \57\ 12 CFR 1024.38(c)(1).
    \58\ 12 CFR 1024.38(c)(2).
---------------------------------------------------------------------------

     Early intervention for delinquent borrowers. Mortgage 
servicers must make a good faith effort to establish live contact with 
a borrower no later than the 36th day of a borrower's delinquency.\59\ 
No later than the 45th day of delinquency, a servicer must provide a 
written early intervention notice.\60\
---------------------------------------------------------------------------

    \59\ 12 CFR 1024.39(a).
    \60\ 12 CFR 1024.39(b).
---------------------------------------------------------------------------

Credit Cards

    In 2009, Congress enacted the Credit Card Accountability, 
Responsibility, and Disclosure Act (CARD Act), establishing new 
protections for consumers with credit cards.\61\ The CARD Act included 
a number of changes to credit card servicing and payment processing 
practices. For example, these changes include:
---------------------------------------------------------------------------

    \61\ Pub. L. 111-24. Consumers with credit cards had a number of 
servicing protections in place under TILA prior to the enactment of 
the CARD Act, including those related to error resolution, limits on 
liability and periodic statements.
---------------------------------------------------------------------------

     Timely posting of payments. Credit card companies must 
credit all payments received by 5 p.m. on the day they are 
received.\62\ If they are received by 5 p.m. on the due date, payments 
are generally considered to be on-time.
---------------------------------------------------------------------------

    \62\ 15 U.S.C. 1666c(a).
---------------------------------------------------------------------------

     Periodic billing statements. Credit card companies must 
have reasonable procedures designed to ensure that billing statements 
are mailed or delivered at least 21 days before a payment is due.\63\ 
In addition, credit card companies must disclose on the billing 
statement how long it would take the consumer, including how much it 
would cost, to pay the full balance on the card by paying only the 
required minimum payments.\64\ The statement must also disclose the 
monthly payment required to repay the full balance in three years, and 
the resulting total cost to the consumer, assuming no additional 
transactions.\65\
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    \63\ 15 U.S.C. 1666b(a).
    \64\ 15 U.S.C. 1637(b)(11)(B)(i) and (ii).
    \65\ 15 U.S.C. 1637(b)(11)(B)(iii).
---------------------------------------------------------------------------

     Application of Payments. Credit card companies, upon 
receipt of a payment in excess of the minimum payment amount due, must 
first apply the excess to the card balance bearing the highest interest 
rate, and then to each successive balance bearing the next highest rate 
of interest, until the payment is exhausted.\66\
---------------------------------------------------------------------------

    \66\ 15 U.S.C. 1666c(b)(1).
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Part B: Questions Related to Student Loan Servicing

    The Bureau is interested in responses in the following general 
areas, as well as the specific questions below. Part A of this Request 
for Information (RFI) provides a general overview of the problems 
experienced by consumers when repaying student debt.
    In the following section, we offer commenters a series of questions 
to consider when responding to this RFI.

[[Page 29310]]

Responses may include answers to the following categories of questions. 
Part One of this section solicits feedback on questions related to 
general practices in the student loan servicing industry, including 
industry practices for borrowers in distress. Part Two seeks comments 
on the applicability of consumer protections from other consumer 
financial product markets, including the markets for servicing credit 
cards and mortgages. Part Three solicits feedback on the availability 
of data about student loan performance and borrower characteristics 
during repayment. Respondents are encouraged to provide responses to 
any of the broad categories of questions outlined below.

Part One: General Questions on Common Industry Practices Related to 
Student Loan Repayment

    The following section seeks to solicit input on common practices, 
policies, and procedures in the student loan servicing market. 
Respondents may wish to address any structural features of the student 
loan servicing market as they relate to specific practices, including 
but not limited to:
     The traditional compensation model for third-party student 
loan servicing, including compensation related to default aversion and 
alternative repayment options;
     Information systems used by student loan servicers, 
including information systems used to process alternative repayment 
options, servicing transfers, and furnishing of credit information; or
     Existing federal and state statutory or regulatory 
protections for student loan borrowers in repayment.
    Respondents may also wish to highlight effective or innovative 
approaches to delivering service, including:
     Practices by incumbents or new entrants in the student 
loan servicing market;
     Practices by loan servicers in other markets, including 
but not limited to servicing practices for credit cards and mortgages; 
or
     Alternative business models to traditional loan servicing 
that could reduce costs, increase recoveries, or enhance transparency 
for borrowers.

Practices Related to Student Loan Repayment

    (1) Please describe the extent to which issues related to the 
following common student loan servicing policies and procedures should 
inform policymakers and market participants considering options to 
improve the quality of student loan servicing, including but not 
limited to:
    a. Processing, allocation, and application of payments (including 
partial payments and prepayments);
    b. The imposition and disclosure of late fees, including the impact 
of late fees across billing groups;
    c. Transfer of loans between lenders, loan holders, and student 
loan servicers;
    d. The complaint resolution process (including the consumers' 
ability to adequately request and receive accurate and timely responses 
for information and corrections related to their account);
    e. Furnishing of credit information to credit reporting agencies 
(including the appropriateness, adequacy, and accuracy of the 
information furnished);
    f. The impact of a single late payment on borrowers' future 
abilities to avail themselves of repayment benefits, such as interest 
rate reductions for enrolling in auto-debit;
    g. Disclosure, accessibility, and availability of refinance 
products;
    h. Disclosure, accessibility, and availability of options to 
release a co-signer from their legal obligation to repay a co-signed 
student loan; or
    i. Disclosure, accessibility, and availability of options to 
discharge or reduce student loan debt in the event of the death or 
disability of a borrower or co-signer.

Practices Related to Student Loan Repayment for Borrowers in Distress

    (2) Please describe the extent to which issues related to the 
following common student loan servicing policies and procedures should 
inform policymakers and market participants considering options to 
improve the quality of student loan servicing for borrowers in 
distress, including but not limited to:
    a. Procedures servicers utilize to ensure that borrowers can avail 
themselves of alternative repayment options;
    b. The circumstances in which a fee occurs or should be 
permissible, and the manner of disclosure of servicing-related fees, 
including those imposed for modifications or cessation of payment (e.g. 
forbearance or deferment);
    c. The offering and disclosure of variable rate private loans that 
increase the interest rate based on borrower behavior, including missed 
payments;
    d. Policies and procedures related to acceleration of debts 
(including the availability and disclosures of co-signer release 
policies);
    e. Disclosure, accessibility, and availability of affordable 
modification options; or
    f. The adequacy and clarity of communication regarding certain 
borrower rights to discharge debt (e.g., in cases of school misconduct, 
borrower disability).

Impact of Practices Related to Student Loan Repayment for Borrower 
Segments With Unique Characteristics

    (3) Please identify any unique issues that are specific to certain 
segments of the student loan borrower population related to the common 
student loan servicing practices, operations, policies, and procedures 
described above. Responses should consider borrower segments with 
unique characteristics, including but not limited to servicemembers, 
veterans, and their families; first-generation college attendees; 
current or former attendees of Historically Black Colleges and 
Universities (HBCU) or Minority-Servicing Institutions (MSI); and older 
Americans.

Part Two: Applicability of Consumer Protections From Other Consumer 
Financial Product Markets

    Respondents may wish to evaluate existing loan servicing 
protections for consumers in other markets, including protections for 
consumers with mortgages and credit cards. The following questions seek 
to solicit feedback on any conduct requirements required by statute, 
regulation, consent decree or other means that should inform 
policymakers and market participants when considering options to 
improve the quality of student loan servicing. Respondents may wish to 
consider aspects of loan servicing in these markets that are common 
across products and may also wish to note differences between types of 
loan servicing that may make the delivery of service unique to a 
particular market. Responses need not address all questions in this 
section and need not be limited to the specific provisions identified 
below.

Requirements Related to Mortgage Servicing Practices

    (4) Describe any mortgage servicing standards or other provisions 
under RESPA, TILA or the Home Ownership and Equity Protection Act 
(HOEPA) that should inform policymakers and market participants 
considering options to improve the quality of student loan servicing. 
Responses need not be limited to requirements related to:
    a. Payment handling. Specific conduct requirements for mortgage 
servicers related to payment handling, including payoff requests or 
prompt crediting of payments, and to periodic statements, including the 
timing of periodic statements or specific periodic

[[Page 29311]]

statement disclosures for delinquent borrowers.
    b. Servicing transfers. Specific conduct requirements for mortgage 
servicers in the event of a servicing transfer, including requirements 
related to the timing of notices in the event of a transfer of 
servicing, record retention requirements for the transferor servicer, 
or prohibitions against certain late fees and treating certain payments 
as late for a fixed period following the transfer of servicing.
    c. Error resolution. Specific conduct requirements for mortgage 
servicers related to error resolution and requests for information, 
including notices required upon receipt of a written notice of error or 
request for information, requirements related to investigations and 
error resolution, requirements related to the production of requested 
information, and notices required if requested information is not 
available.
    d. Interest rate adjustment notifications. Specific conduct 
requirements for mortgage servicers related to interest rate adjustment 
notifications, including notice of interest rate adjustment prior to 
the first payment at a new rate and notice of rate adjustment prior to 
the first payment due after the rate adjusts, if payment will change.
    e. Loan counseling. Specific conduct requirements for creditors 
related to homeownership counseling, including the timely provision of 
information about homeownership counseling organizations or 
requirements related to the confirmation of consumer's completion of 
homeownership counseling prior to making a loan that permits negative 
amortization to a first-time borrower.

Requirements Related to Mortgage Servicing for Borrowers in Distress

    (5) Describe any mortgage servicing standards or other provisions 
under RESPA, TILA, or HOEPA that should inform policymakers and market 
participants considering options to improve the quality of student loan 
servicing for distressed borrowers. Responses need not be limited to 
specific conduct related to:
    a. Live contact. Specific conduct requirements for mortgage 
servicers related to outreach to delinquent borrowers, including the 
requirement for mortgage servicers to establish or make good faith 
efforts to establish live contact with borrower early in borrowers' 
delinquency.
    b. Loss mitigation information. Specific conduct requirements for 
mortgage servicers related to the disclosure of loss mitigation 
options, including the requirement for mortgage servicers to maintain 
policies and procedures reasonably designed to ensure that servicer 
personnel assigned to a delinquent borrower provide the borrower with 
accurate information about loss mitigation options and actions the 
borrower must take to be evaluated for such loss mitigation options.
    c. Timing requirements for foreclosure filings. Specific conduct 
requirements for mortgage servicers related to timing for foreclosure 
filings, including the specific prohibition on mortgage servicers from 
making the first notice or filing required by applicable law for any 
judicial or non-judicial foreclosure process until after a borrower 
becomes delinquent for a certain period of time. Respondents may wish 
to contrast these requirements with conduct requirements in place 
related to servicing student loans in late-stage delinquency.
    d. Assignment of continuity of contact personnel. Specific conduct 
requirements for mortgage servicers related to ensuring borrowers can 
access customer service personnel, including the requirement for 
mortgage servicers to maintain policies and procedures reasonably 
designed to achieve the objective of assigning continuity of contact 
personnel (which can be one or a team of personnel) to a delinquent 
borrower who will be available via telephone, and will provide a live 
response to a borrower immediately or in a timely manner.
    e. Conduct by continuity of contact personnel. Specific conduct 
requirements for mortgage servicers related to customer service 
provided by continuity of conduct personnel, including the requirement 
for mortgage servicers to have reasonable policies and procedures 
reasonably designed to ensure that assigned continuity of contact 
personnel retrieve in a timely manner written information the borrower 
provided to the servicer (or prior servicers) in connection with a loss 
mitigation application and provide such information to other persons 
required to evaluate a borrower for loss mitigation options made 
available by the servicer, if applicable.
    f. Prohibition on recommending default. Specific conduct 
requirements for creditors related to conditions under which a creditor 
can recommend refinancing of a high-cost mortgage, including a 
prohibition on recommending default on an existing loan.
    g. Prohibition on certain fees. Specific conduct requirements for 
creditors related to fees charged to borrowers, including the 
requirement that creditors, servicers and assignees cannot charge a fee 
to modify, defer, renew, extend, or amend a high-cost mortgage, the 
restriction of late fees to four percent of the past due payment and 
rules for imposing late fees when a consumer resumes making payments 
after missing one or more payments, or the limitation on the imposition 
of fees for payoff.

Requirements Related to Servicing Practices in the Credit Card Market

    (6) Describe any protections afforded to consumers with credit 
cards, including but not limited to protections under the Credit CARD 
Act of 2009 (15 U.S.C. 1637), to inform policymakers and market 
participants considering options to improve the quality of student loan 
servicing. Responses should consider, but should not be limited to:
    a. Notice of rate increases and significant changes. Specific 
conduct requirements for card issuers related to written notice of an 
increase in an annual percentage rate or any other significant change, 
including the requirement that such notice be sent 45 days prior to the 
effective date of the rate increase or change.
    b. Notice of certain penalties for late payments. Specific conduct 
requirements for card issuers related to written notices required in 
response to borrowers' failure to make a minimum payment within 60 days 
of the due date, including the notice requirement triggered when a card 
issuer increases the APR or fees.
    c. Timing of periodic statements. Specific conduct requirements for 
card issuers related to the timing of periodic statements, including 
the requirement that a creditor may not treat a payment on an open-end 
consumer credit plan as late for any purpose, unless the creditor has 
adopted reasonable procedures designed to ensure that each periodic 
statement is mailed or delivered to the consumer no later than 21 days 
before the payment due date.
    d. Posting of payments. Specific conduct requirements for card 
issuers related to the posting of payments, including the requirement 
that credit card companies credit or treat as on time all payments 
received by 5 p.m. on the day they are received.
    e. Fees for processing payments. Specific conduct requirements for 
card issuers related to fees for processing payments, including the 
requirement that a creditor may not impose a separate fee to allow the 
borrower to repay an extension of credit or finance charge, such as a 
fee for processing a payment, unless such payment involves

[[Page 29312]]

an expedited service by a service representative of the creditor.
    f. Application of payments. Specific conduct requirements for card 
issuers related to the application of payments, including the 
requirement that credit card companies upon receipt of a payment in 
excess of the minimum payment amount due, must first apply the excess 
to the card balance bearing the highest interest rate, and then to each 
successive balance bearing the next highest rate of interest, until the 
payment is exhausted.
    g. Limitations on changes to fees, charges and annual percentage 
rates. Specific conduct requirements for card issuers related to 
certain changes to terms, including the requirement that a card issuer 
may not elect to increase the annual percentage rate or assess fees or 
other charges, with some exceptions.
    h. Disclosures related to payments and interest charges. Specific 
conduct requirements for card issuers related to disclosures about 
payment application and interest charges, including the requirement 
that credit card issuer provide disclosures on consumers' periodic 
statements warning them that if they make only minimum payments on 
their accounts, they will pay more in interest, and it will take longer 
to pay off their account balance.
    i. Online publication of certain documents. Specific conduct 
requirements for card issuers related to the publication of certain 
documents online, including the requirement for a creditor to establish 
and maintain an Internet site and post the written agreement between 
the creditor and the consumer for each credit card account under an 
open-end consumer credit plan and that the creditor provide in 
electronic format the credit card agreement on the creditor's Web site.

Other Requirements Related to Loan Servicing

    (7) To what extent should the specific conduct requirements 
included in settlements between financing services providers and state 
law enforcement agencies inform policymakers and market participants 
considering options to improve the quality of student loan servicing? 
Respondents may wish to address, but need not be limited to, specific 
requirements contained in the National Mortgage Settlement (NMS), 
including protections related to members of the military and their 
families.
    (8) Describe any other standards of conduct required by statute, 
regulation, consent decree or other means that should inform 
policymakers and market participants when considering options to 
improve the quality of student loan servicing, including but not 
limited to, provisions related to:
    a. Payment handling and allocations;
    b. Periodic statement requirements;
    c. Disclosures required on periodic statements;
    d. Servicing transfers;
    e. Dispute resolution procedures;
    f. Request for information;
    g. Interest rate adjustment notifications;
    h. The imposition of fees;
    i. Imposition of interest rate penalties in response to changes in 
customer behavior;
    j. The availability and accessibility of affordable repayment 
options; or
    k. The ability for a lender to place a borrower or co-signer in 
default based on consumer behavior other than missed payments.
    (9) Describe the extent to which the existing statutory or 
regulatory protections afforded to consumers under the following laws 
should inform policymakers and market participants considering options 
to improve the quality of student loan servicing:
    a. Truth in Lending Act;
    b. Real Estate Settlement Procedures Act;
    c. Fair Credit Reporting Act;
    d. Fair Debt Collection Practices Act;
    e. Electronic Funds Transfer Act;
    f. Higher Education Act; or
    g. Federal Trade Commission Act.

Part Three: Impact of Limits on Availability of Data About Student Loan 
Servicing and Student Loan Repayment on Borrowers

    The following section seeks to solicit input about the availability 
of data on student loan performance and on borrower characteristics 
during repayment. Respondents should consider existing data sources and 
gaps in availability that should inform policymakers and market 
participants considering options to improve the quality of student loan 
servicing.
    (10) To what extent do available data and reports about student 
loan repayment reveal usage and specific risks to student loan 
borrowers, including those related to:
    a. Loan performance, delinquency, and default;
    b. Utilization of income-driven payment plans and other alternative 
repayment options; or
    c. Utilization of repayment options that result in temporary 
cessation of payment, including deferment and forbearance.
    (11) To what extent do gaps in available data create problems for 
policymakers or other stakeholders seeking to evaluate consumer risks 
as it relates to student loan servicing?
    (12) To what extent are publicly available data sets in other 
consumer financial markets (e.g., the Bureau's Home Mortgage Disclosure 
Act microdata, the OCC's monthly mortgage metrics, and the Bureau's 
Credit Card Agreement Database) instructive as policymakers consider 
ways to better afford the public and regulators the ability monitor 
trends in the market and assess consumer risks?

    Authority: 12 U.S.C. 5511(c).

    Dated: May 15, 2015.
Christopher D'Angelo,
Chief of Staff, Bureau of Consumer Financial Protection.
[FR Doc. 2015-12276 Filed 5-20-15; 8:45 am]
BILLING CODE 4810-25-P