Consumers Union criticizes CFPB decision to abandon efforts to protect student borrowers from abusive loan servicing practices
Decision leaves struggling borrowers in the cold and will hurt economy as loan defaults climb
May 10, 2018
WASHINGTON, D.C. – The Consumer Financial Protection Bureau has announced that it is no longer planning on developing new rules to protect borrowers from abusive student loan servicing practices. The decision is another troubling sign that the CFPB under Acting Director Mick Mulvaney is dramatically cutting back on its efforts to stop abusive financial practices, according to Consumers Union, the advocacy division of Consumer Reports.
The announcement comes on top of Mulvaney’s decision this week to eliminate the Office of Students and Young Consumers, which had uncovered widespread lending abuses and deceptive practices that make it difficult for borrowers to manage their education debt responsibly.
“Despite the fact that there are serious problems in the student loan market, these actions make clear that this administration has no interest in protecting student borrowers from abusive loan servicing practices,” said Suzanne Martindale, senior attorney for Consumers Union. “All too often, borrowers get the runaround from loan servicers when they try to access basic consumer protections and manage their debt responsibly. These breakdowns make it costlier and much more stressful for borrowers working hard to pay back their loans.
Martindale continued, “Loan servicing companies should have to follow basic rules of the road, so that borrowers receive fair and consistent treatment when they’re trying to do the right thing and avoid defaulting on their loans. Mulvaney’s actions will leave struggling borrowers in the cold and inflict severe damage on the economy for years to come as loan defaults continue to climb.”
Research by the Office of Students and Young Consumers prompted the CFPB to file a lawsuit against Navient, the nation’s largest student loan servicer, for providing borrowers inaccurate information, processing payments incorrectly, and failing to take action to address consumer complaints. The CFPB’s lawsuit charges that Navient violated the law by making it harder for struggling borrowers with federal loans to enroll in more affordable repayment options they had a right to access to help manage their debts.