As part of its ongoing efforts to make sure consumers are receiving as much protection as possible when it comes to the various financial accounts in their lives, one federal watchdog agency recently announced it plans to begin examining how private student loan issuers do business.
The Consumer Financial Protection Bureau’s new procedures for examining student loan issuers were issued earlier this week, ahead of its steps to determine whether these financial institutions are doing all they can to protect borrowers from harmful terms, according to a report from the agency. Its examination will take into account large banks and nonbank institutions alike, as the CFPB has regulatory control over both.
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Student loans have been in the news a lot lately, largely as a result of the difficulty many recent college graduates typically have in affording the repayment terms they face relatively quickly, the report said. Further, because many borrowers of these loans don’t have a lot of experience in dealing with other accounts, the likelihood of a repayment misstep is considerably higher.
“For many borrowers, a student loan may be their first major financial decision,” said CFPB director Richard Cordray. “With student debt topping a trillion dollars, we will be working to ensure consumers are treated fairly and lenders are held accountable.”
The CFPB’s examination will include whether lenders are using accurate and nondiscriminatory advertising, making all necessary disclosures about loan terms, giving borrowers accurate account information, and handling all inquiries and complaints in a timely manner, the report said. Further, the agency is also working to develop consumer tools that allow students and their families to shop for student loans, compare financial aid offers and gain a more complete understanding of their repayment options when they graduate. Further, it asks that consumers take the time to explore these new features, and provide feedback so that it can better enhance them in the future.
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Student loans can be extremely costly for many young adults, as the average college graduate now leaves school with tens of thousands of dollars in debt spread across education financing, credit cards and auto loans. All of these considerations can make it very difficult for a borrower who is struggling to find work to meet all their various obligations on time and in full.
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