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CFPB-SLSA Servicer Workgroup

The CFPB-NCHER legal meeting held on August 5, 2013, focused on understanding consumer complaints regarding student loan servicing. Key takeaways included the need for clarity in processes to reduce borrower inquiries and complaints. The meeting fostered dialogue among ten servicers, blending large and small entities, about best practices and regulatory requirements. The goal was to inform CFPB supervision and enhance consumer education. Discussions covered payment posting, servicing transfers, and the Servicemembers Civil Relief Act, aiming to improve borrower experiences.

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CFPB-SLSA Servicer Workgroup

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  1. CFPB-SLSAServicer Workgroup EFC/NCHER Legal Meeting New York City August 5, 2013

  2. Background • CFPB agenda is very consumer complaint driven • When borrowers don’t understand a process, it can lead to an inquiry or a complaint • The CFPB approach with these meetings has been that “where there is smoke, there may be fire….” but willing to admit that “the smoke may in fact be fog” • Certain preconceptions coming into these meetings • Tendency to think in terms of mortgage practices • Consumer bias • Servicers’ opportunity to explain and set the record straight • Best practices discussion

  3. Process • 10 servicers in workgroup • Mix of large and medium-sized • Bank and non-bank • For profit and not-for-profit • Private loans and FFELP loans • Weekly internal group calls to discuss servicing practices and specific questions raised by the CFPB • Issue papers looking at existing statutory and regulatory requirements, and comparable mortgage requirements • Surveys

  4. Process • 3-4 face-to-face ½ day meetings with the CFPB • Personnel from several offices • Office of Installment and Liquidity Lending Markets (Research, Markets and Regulations Division) • Office of Students • Office of Servicemember Affairs • Office of Consumer Response • Unlike supervision so far, no one from Enforcement!  • Use of PowerPoint overviews on each topic • All information marked “Business Information” • Follow-up questions

  5. Limitations on Discussion • Use of surveys helped in avoiding specific servicers having to talk about how they do something • “All” of the servicers in the group vs. “the majority” or “most” of the servicers in the group • FSA aware of the workgroup and instructed servicers not to discuss their role as DL servicers and contractors to ED

  6. Issues • Payment Posting • Online delays • Obstacles for posting as of receipt date • Prepayment • Due date advance and principal reduction • Standardization of servicemember information • Identifying and servicing servicemember borrowers • Servicemembers Civil Relief Act (SCRA) • Other benefits • Intergovernmental

  7. Issues • ACH – Account transfers • Technology issues • Legal transfer of the authorization authority  • Repayment Options for FFELP and Private Loans • Disclosure of options  • Servicing transfers and notification process • Intercompany technology issues • Borrower communication issues • Timing issues • Misdirected payment issues • RESPA model

  8. Outcome • We hope that the CFPB has gained valuable insights into the hows and whys of certain servicing practices • This new knowledge should inform their supervision of student loan servicers and help reduce issues in their supervision activities • Improved consumer education efforts

  9. Questions? • Winkie Crigler Executive Director, SLSA 202-955-6055 wpcrigler@slsa.net

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