The CFPB Expands its Role as a Student Loan Watchdog
Armed with greater knowledge about the notoriously opaque student loan market, citizens and consumers will now be able to make more educated and informed choices about their education, their financial planning, and their future.
by Miles Unterreiner
In Frontier Group’s recent report Private Loans, Public Complaints: The CFPB’s Consumer Complaint Database Gets Real Results for Student Borrowers, we took a look at the worst private student loan offenders and examined how the CFPB has helped student loan borrowers receive monetary relief of up to $75,000 from their private lenders. This month, the CFPB announced that it will begin supervision of the federal student loan market, which encompasses more than 85 percent of outstanding student loans. (Though generally riskier, private student loans make up only 7 percent of the market.) Under intense criticism from financial reformers like Elizabeth Warren (D-Mass.) for its lackadaisical response to allegations of lender misconduct, the Department of Education will now share responsibility for oversight of the federal student loan market with Cordray’s CFPB.
Established under Dodd-Frank and charged by Congress with protecting consumers in the financial marketplace, the CFPB opened for business on July 21, 2011. In just over two years on the job, CFPB Director Richard Cordray has already overseen the investigation of exploitative “overdraft protection” policies that allowed banks to charge consumers hundreds of dollars for a single overdraft; led a crusade against illegal kickbacks from mortgage insurers to mortgage companies; and helped return millions of dollars to consumers through civil enforcement penalties against the abusive practices of large credit card companies. The CFPB has also made its Consumer Complaint Database publicly available online, allowing consumers to see which financial institutions are effectively serving consumers and which are generating high levels of dissatisfaction among the public.
The CFPB’s decision to take responsibility for federal student loans is a victory not just for financially beleaguered student loan borrowers, but for government transparency and accountability more broadly. Armed with greater knowledge about the notoriously opaque student loan market, citizens and consumers will now be able to make more educated and informed choices about their education, their financial planning, and their future.