Private Student Lending: The challenges and opportunities in the Consumer Financial Protection Bureau’s annual report

January 2013
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Private Student Lending: The challenges and opportunities in the Consumer Financial Protection Bureau’s annual report

At a glance

Consumer Finance Protection Bureau (CFPB) released its first Student Loan Ombudsman’s Annual Report, summarizing and reporting on approximately 2,900 complaints received between March and September of 2012. Issues raised by borrowers suggest a number of perceived and actual shortcomings in the practices of the Private Student Lending (PSL) industry.

On October 16, the Consumer Finance Protection Bureau (CFPB) released its first Student Loan Ombudsman’s Annual Report, summarizing and reporting on approximately 2,900 complaints received between March and September of 2012. Issues raised by borrowers suggest a number of perceived and actual shortcomings in the practices of the Private Student Lending (PSL) industry.

In addition, the report highlights the similarities to the complaints brought forth by consumers in the mortgage industry, specifically including claims of inappropriate application of payments, timeliness in error resolution, and inability to contact appropriate personnel when facing economic hardship.

While future rules and enforcement actions are unknown at this time, the long term impact is likely to make more customer-centric and flexible business and operating models necessary. Acting now rather than delaying will allow you to be better positioned to capitalize on the strategic opportunities of this growing market and be prepared for future CFPB examinations.

This point-of-view describes the 5 “forward-leaning” actions PSL industry participants should consider as part of their plan for future success.