CFPB Protects Against Deceptive Student Lending Practices


Over the last decade, the financial burden of student loan debt has become a major topic for consumer advocates. With trillions of dollars in student loan debt outstanding across the country, many consumers have difficulty making student loan payments, particularly when they are dealing with private loans that do not have income-based repayment options. Who is protecting consumers in Oak Park and other parts of the U.S. when it comes to predatory student lending practices? According to a recent article from Inside Higher Ed, the Consumer Financial Protection Bureau (CFPB) has emerged not just as a general regulator of deceptive lending practices, but of student lending practices more specifically.
Since its launch in 2011, the CFPB has taken a number of steps to help limit harmful lending practices when it comes to student borrowers.
CFPB Offers Enforcement Role in Student Lending
As the article explains, the CFPB arose out of the financial crisis with a mandate to oversee mortgage servicing, credit card services, and student loan practices. Over the last five years, the CFPB has provided oversight for many different kinds of private lending practices, including those connected to higher education. One of the most significant roles it has played, the article contends, is one of enforcement. While we do not like to think of enforcement as the most significant role of a watchdog like the CFPB—there is a sense that it would be better to avoid needing to get to the point of enforcement—the CFPB appears to be working to mitigate the harms resulting from some private lending practices.
In helping to establish the CFPB in 2011, Senator Elizabeth Warren emphasized how “enforcement is generally a last resort but having a ‘cop on the beat’ is an essential tool for consumer protection.”
In just the last two years, the CFPB has played a major role in addressing issues with private student loans and for-profit colleges. For instance, in July of 2015, the CFPB “ordered Discover Bank to repay $18.5 million in student loans.” In August, it similarly ordered the student lending division of Wells Fargo to “pay a $3.6 million penalty and provide $410,000 in relief to consumers” for what it described as “illegal student loan practices.” Only a month later, the CFPB required Bridgeport Education to pay an $8 million fine for deceptive student loan practices, and it also ordered a for-profit college to pay more than $23 million to student borrowers.
Future of the CFPB, Deceptive Student Lending Practices, and For-Profit Institutions
In addition to enforcement actions, the CFPB has also begun hearing complaints from consumers. Also, the article suggests that its enforcement actions have urged other federal agencies such as the U.S. Department of Education (DOE) to “take a more active regulatory role in the for-profit and student loan servicing areas.”
We will need to wait and see what role the CFPB will play in the regulatory arena, specifically when it comes to for-profit colleges. Right now, the CFPB’s authority extends to private student loans and deceptive debt collection practices. When issues concerning for-profit institutions fall into these categories, the CFPB has authority. However, for problems that fall outside these fields, regulatory and enforcement actions may need to come from the DOE and the Federal Trade Commission (FTC).
If you have questions about filing a claim against a deceptive lender, an experienced Oak Park consumer protection lawyer can assist you. Contact the Emerson Law Firm today to get started on your case.
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