CFPB Finds Some Student Loan and Mortgage Servicers Fail Borrowers
05/01/17 – The Consumer Financial Protection Bureau (CFPB) announced that its recent supervisory work has found that some student loan and mortgage servicers are violating the law by failing to legally protect struggling borrowers.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has authority to supervise banks and credit unions with more than $10 billion in assets and certain nonbanks. These include mortgage companies, private student lenders, payday lenders, and others defined as “larger participants.”
For student loan servicing, the Bureau examiners found that some student loan servicers routinely acted on flawed information, and failed to refund charges imposed on borrowers who had been wrongly denied the right to defer payments while enrolled in school.
For mortgage servicing, Bureau examiners found one or more servicers kept borrowers in the dark on foreclosure alternatives, prematurely launched the foreclosure process, mishandled escrow accounts, and issued incomplete periodic statements.
The report highlights that non-public supervisory activities have led to the recovery of about $6.1 million for 16,000 consumers harmed by illegal practices by auto loan originators. The CFPB’s recent supervisory activities led to or supported five recent public enforcement actions, resulting in over $39 million in consumer remediation and another $19 million in civil money penalties. The report shares information the industry can use to comply with federal consumer financial law.