ED’S NEW PARTNER-- THE “CFPB”
o Consumer Financial Protection Bureau (CFPB)
o Established as part of Dodd-Frank Wall Street Reform and Consumer
Financial Protection Act passed in July 2010
o “Watchdog” partner of other agencies
o Response by President Obama and Congress to :
-- Role of uninformed consumers in financial crisis
-- Need to monitor actions of providers of financial
products and services, and that includes higher
education institutions!
A BRIEF HISTORICAL PERSPECTIVE
o
The movement from caveat emptor to caveat venditor
-- College students became a consumer class of interest
*Private student loan customers
*Users of taxpayer dollars
*Buyers of higher education services
o
Perceptions that students need consumer protections in part because:
--Predatory schools and lenders exist
---First generation college students can’t rely on family experiences to help
them choose
---Veterans are vulnerable
---People may be misled when looking for a quick fix to unemployment
ENTER THE CFPB….
o
Entire sections of CFPB legislation devoted to private loans
--Private Student Loan Ombudsman (Rohit Chopra)
--Authority to regulate private student loans
*Rulemaking
*Program review of private student loan lenders
o
Another section of legislation devoted to veterans’ services
--Office of Service Member Affairs directed by Holly Patraeus
o
Veterans’ Principles of Excellence
--CFPB consults on enforcement of principles and institutional
compliance with them
o
Know Before You Owe
--Philosophy of comparison shopping
---Establishes partnership between CFPB and ED
THE CFPB AND PRIVATE STUDENT LENDING
o Born from concern that many students do not exhaust federal aid eligibility before
turning to private education loans
--Studied this premise in CFPB’s first private loan report
o Private loans are hard for students to compare and keep track of
--Private loans not on NSLDS
o Students need an advocate (private loan ombudsman) and a formal complaint
mechanism
--CFPB established both
o Private lenders need to be monitored to assure compliance with existing consumer
lending laws
-- CFPB has this authority
o Students need help getting a clear picture of their total student loan repayment
--Student Debt Repayment Assistant
CFPB AND ED ISSUE PRIVATE LOAN REPORT
o Required report to Congress issued in July 2012
-- Studied the borrowing boom from 2004-2008
*Compared lending practices to subprime housing market
*Characterized by direct-to-consumer marketing
*Non-bank lenders grew fast, and died even faster
o Joint recommendations for private loans made by CFPB and ED
-- Mandatory school certification
-- More debt management and mitigation options
-- Change definition of private loan
-- NSLDS type of private loan tracking system
ANOTHER REPORT ISSUED BY CFPB IN 10/12
o Ombudsman reports 2,900 complaints received since March 2012
-- 65% related to servicing (billing, deferment/forbearance, credit
reports
-- 30% problems when unable to pay (default, debt collection)
-- 5% loan origination & marketing (difficulty applying, borrower
confusion)
o
Fast-forward to March 2013
-- Consumer Financial Protection Bureau proposes rule to oversee
nonbank student loan servicers (both federal and private “larger
participants” that handle more than 1 million borrower accounts)
-- NPRM proposes that CFPB oversee servicer activity for compliance
with federal consumer financial laws tio curtail “confusion, dead-ends,
and run-arounds
CFPB’S OFFICE OF SERVICE MEMBER AFFAIRS
o Service Members and Veterans are protected class under CFPB
-- Service members subject to sudden deployment
-- They are frequently relocated
-- They have emergencies that lead to unplanned and
unique financial issues
o They deserve consumer protection to
-- Honor their service commitment to country
-- Protect their government funded benefits
VETERANS’ PRINCIPLES OF EXCELLENCE
o Executive Order signed by President Obama in April Aimed at
Schools
-- Service members, veterans, and their families are targets for
deceptive, aggressive tactics by some education institutions
* They have “easy” access to funds for education costs from VA
benefits
* VA benefits count toward the 10% in 90-10 rule
*Hard time exercising student loan repayment protections
o Institutions “voluntarily” committed to sign Principles of Excellence
-- Institutions that signed listed on VA web site
CFPB & ED TEAM UP TO CREATE
FINANCIAL AID SHOPPING SHEET!
FINANCIAL AID SHOPPING SHEET
o “Model of what all financial aid award offers should be”
-- Standard format
-- Comparison data for institutions (provided by ED 1/18)
*Graduation rate
*Default rate
*Median borrowing & monthly payment, link to
loan repayment information
o More than 700 institutions representing more than 1.8M
undergraduate students to use in 2013-14
o If you signed Veterans’ Principles of Excellence, you must use for
military students
USE OF SHOPPING SHEET
o Marketing Tool
o Add-on to Net Price Calculator
o Replacement to Financial Aid Award Offer
o Supplement to Financial Aid Award Offer
Do you plan to use the Shopping Sheet at your school,
and if so, how
QUESTIONS