Consumer Financial Protection Bureau Aims to Shed Light on the Private Student Loan Industry

The Consumer Financial Protection Bureau (CFPB) today announced that it is seeking information from students, schools, industry, and other stakeholders on the private student loan market. The CFPB published a Notice and Request for Information to collect data on a series of issues impacting private student loans from origination to servicing to collection.

“The private student loan market is one of the least understood consumer credit markets. It has been operating in the shadows for too long,” said Raj Date, Special Advisor to the Secretary of the Treasury on the CFPB. “Shedding light on this industry will benefit students, lenders, and the market as a whole.”

Private student loans are financial products used for higher education that are not originated through the federal student loan program. Many students, especially those attending private institutions, use these loans to finance tuition and other educational expenses. Too little is known about this financial product, however, which millions of Americans have used and which has resulted in billions of dollars of unpaid debt. Those active in the private student loan market include banks, credit unions, state agencies, nonprofit organizations, marketers, servicers, and schools themselves. Unlike federal student loans, private student loans may not include certain consumer protection features for borrowers facing hardship.

The CFPB is asking the public, students, families, the higher education community, and the student loan industry – both lenders and servicers – to provide information on this financial product voluntarily. The CFPB is interested in a complete picture of private student lending, so it is seeking a broad swath of information, including:

• Information available to shop for private student loans
• The role of schools in the marketplace
• Underwriting criteria
• Repayment terms and behavior
• Impact on choice of field of study and career choice
• Servicing and loan modification
• Financial education and default avoidance

The CFPB will use the collected input to assist with preparation of a report to Congress on private student lending. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB and the Department of Education to produce this report by July 21, 2012. The CFPB will also use the information it gathers to prioritize its own regulatory and education work.

The notice, along with information on how to electronically submit comments, is located on the CFPB’s website. The public has 60 days to submit comments after the notice has been submitted to the Federal Register.

The Notice and Request for Information is available at: http://go.usa.gov/IQP.

Department of Justice Announces Compensation for Servicemembers

WASHINGTON – The Justice Department announced today that, as part of its settlement with BAC Home Loans Servicing LP, a subsidiary of Bank of America Corporation, servicemembers whose homes were unlawfully foreclosed upon will each receive a minimum $116,785 plus compensation for any equity lost to compensate them for the bank’s alleged violation of the Servicemember Civil Relief Act (SCRA).

Bank of America agreed to pay $20 million to approximately 160 servicemembers who were illegally foreclosed on between 2006 and the middle of 2009. Under the agreement, Bank of America agreed to provide information about its foreclosures from mid 2009-2010 and will pay damages in the same minimum amount to those servicemembers whose homes were illegally foreclosed upon to compensate for the loss of their homes. The review is on-going.

“The men and women serving our nation should not have to worry about a bank foreclosing on their home while they bravely serve our country,” said Thomas E. Perez, Assistant Attorney General for the Civil Rights Division. “The Justice Department will vigorously enforce the laws that protect servicemembers while they do the difficult and necessary work of protecting our country. We have and will continue to work hard to ensure that servicemembers receive the full protections of the law and relief they deserve in a timely fashion.”

On May 26, 2011, the department announced a settlement with BAC Home Loans Servicing LP, formerly known as Countrywide Home Loans Servicing LP, which resolved allegations that the bank unlawfully foreclosed on servicemembers’ homes in violation of the SCRA. This is the largest SCRA settlement ever reached by the department. The Department of Defense also provided critical assistance in identifying the servicemembers whose rights were violated.

Beginning on Nov. 14, 2011, letters will be sent to 157 servicemembers to notify them of the amount of money that they may receive under the settlement. The settlement agreement set a deadline for the end of November 2011 for the Justice Department to determine the amount of damages to which servicemembers may be entitled.

The SCRA provides critical additional consumer and other protections to the men and women serving our nation in the military – its enactment was a recognition that those who are making great sacrifices to protect us deserve our full support at home.

For more information on the Justice Department’s work to protect servicemembers, please visit www.servicemembers.gov.

Source: http://www.justice.gov/opa/pr/2011/November/11-ag-1487.html