Complaints by Student Loan Borrowers Yield Millions in Relief: CFPB

The CFPB's annual report extols the benefits of consumer complaints, which ultimately affect policy

CFPB director Richard Cordray. Photo: Diego M. Radzinschi/ALM CFPB director Richard Cordray. Photo: Diego M. Radzinschi/ALM

The latest annual report from the Consumer Financial Protection Bureau contains a clear message for borrowers encountering problems with loan servicers: Complain. More specifically, file a complaint with the CFPB.

"Complaints by student loan borrowers led to hundreds of millions of dollars in relief and important market reforms,” said CFPB Director Richard Cordray, in a statement.

“When borrowers are empowered to stand up for themselves, they can shape policy and spur government to take action,” said Seth Frotman, CFPB student loan ombudsman, in the same statement.

(Related: CFPB Pursues Illegal Student Loan Practices Despite DOE Data Freeze)

For example, complaints by members of the military led to enforcement actions by the Justice Department, and FDIC halted illegal practices at one large student loan servicer and returned more than $60 million to 77,000 service members in 2014. The coordinated agency work ultimately saved 100,000 military borrowers more than $20 million in student loan interest charges since 2016, according to the CFPB.

Complaints by borrowers about loan servicing practices that delayed or deterred access to promised payment relief led to stronger contractual requirements for four loan servicers handling federal student loans, including the requirement that servicers proactively communicate with student loan borrowers who submit incomplete IDR applications.

“Complaints and robust oversight can move the market to mitigate risk of unanticipated borrower harm through consumer-driven reforms to product features,” according to the CFPB Annual Report.

In its latest annual report, the CFPB writes it received approximately 22,000 complaints from student loan borrowers between Sept. 1, 2016 and Aug. 31, 2017 — more than double the number of last year — including 12,900 concerning federal student loan servicing and 2,300 concerning collection of private and federal loan debt.

(Related: CFPB Sues Navient, the Largest US Student Loan Servicer)

Navient, a student loan servicer that has been sued by the CFPB, was the subject of over 10,000 complaints concerning both federal and private student loans, followed by AES/PHEAA, with close to 2,000 complaints involving federal and student loans.

Borrowers complained about difficulties obtaining access to income-driven payment plans, including during periods of financial stress and as soldiers on active duty; receiving loan discharges in the event of total and permanent disability; and consolidating older federal loans in order to become eligible for specific loan benefits. They also complained about aggressive tactics used by debt collectors including phone calls to employers and other family members.

(Related: How Student Loan Companies Are Causing More Defaults)

The CFPB notes that these difficulties may create acute challenges for the most vulnerable borrowers, including borrowers on parental leave or borrowers with severe disabilities.

It concludes its report by emphasizing the positive role consumer complaints play as the “nexus” between them and systemic reform and recommending further steps.

As a result of consumer complaints, servicers can be subject to routine examinations informed by the experiences of borrowers; oversight agencies can have the necessary tools to take action to halt harmful practices and share critical information with other government entities, including law enforcement; and public policy can be shaped by information identified through this oversight, according to the CFPB.

“There is still much work to be done to improve the student loan system for millions of borrowers,” the report notes. “Industrywide standards to strengthen servicing practices, coupled with robust oversight across federal and state agencies, can help to shape a student loan repayment process that meets borrowers’ needs by ensuring that borrowers are treated fairly, that they can access the benefits and protections access the benefits and protections guaranteed under law or contract, and that they can successfully satisfy their student debt.”

Currently 44 million Americans owe approximately $1.4 trillion in student loan debt. More than 8 million haven’t made a required monthly payment in nine months and are in default. More than 1.2 million defaulted in 2016.

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