The Consumer Financial Protection Bureau on Monday released the procedures the agency will use to scrutinize lenders of private student loans, as well as the servicers for federally guaranteed loans, to ensure that they are complying with existing banking regulations. Such “examinations,” intended to uncover and, if necessary, penalize companies that violate consumer protection laws, have led to heavy fines for credit card companies, and the agency is also examining mortgage lenders and big banks.
The bureau will look into whether private lenders and servicers comply with a range of federal lending laws, including the Truth in Lending Act, which went into effect in 2009 and required additional disclosures for private student loans, as well as lenders’ marketing and underwriting standards. The procedures mention servicing issues for borrowers trying to enroll in federal programs that allow borrowers to make income-based repayments, as well as laws governing lending to active-duty members of the military.
The bureau has focused on student loans (as well as mortgages, credit cards and other financial instruments) since it opened in summer 2011. In July, the bureau issued a sweeping report on private student loans that recommended Congress investigate restoring bankruptcy privileges for those loans. In October, the bureau’s student loan ombudsman issued his own report on issues facing student borrowers.