The Consumer Financial Protection Bureau proposed a rule Thursday that would expand its powers to federally supervise certain non-bank student loan servicers that service both federal and private student loans.
“The student loan market has grown rapidly in the last decade, and servicers are now facing the stress of an increasing number of delinquent borrowers,” said CFPB Director Richard Cordray.
“Our rule would bring new oversight to the student loan market and help ensure that tens of millions of borrowers are not treated unfairly by their servicers,” Cordray said in the announcement.
The CFPB currently oversees student loan servicing at larger banks. Under the proposed rule, any non-bank student loan servicer that handles more than 1 million borrower accounts would be subject to CFPB supervisory authority. With that threshold, the bureau estimates that it would have authority to supervise the seven largest student loan servicers.
Combined, those seven service the loans of 49 million borrower accounts, representing most of the activity in the student loan servicing market.
The proposed rule comes after borrowers provided feedback to the CFPB, saying they have experienced confusion regarding outstanding balances and fees and poor service. Bringing all student loan servicers under CFPB supervision would allow the regulator to evaluate the extent and scope of these issues through examination, the bureau said.
The public will have 60 days to comment on the proposed rule after it is published in the Federal Register.
A factsheet on the student loan servicing proposed rule is available on the CFPB’s website.