CFPB Updates in Student Lending

The Consumer Financial Protection Bureau is set to have a major impact on the creditor’s rights arena. Colleges and universities, even private K-12 institutions, are not immune to the effects of the CFPB as it begins to look at student lending, financial aid offers and how credit cards and other financial products are marketed to students.

On January 31, 2013, the CFPB, led by its director Richard Cordray announced that it will begin examining the impact of the marketing of financial products to students through colleges and universities.    Cordray stated, “We have seen many colleges establish relationships with financial institutions to offer banking services to their students.   The Bureau wants to find out whether students using college-endorsed banking products are getting a good deal.”  The CFPB is specifically looking beyond the requirements of the 2009 CARD Act to see to what extent colleges and universities are pairing with financial institutions, or allowing them access to their students, and if those relationships provide students with sound financial opportunities.  One example that the CFBP may focus on is allowing a financial institution, or university affiliated bank to include credit card or checking account applications with other informational materials provided to incoming students by the school. 

The CFPB has published a Notice and Request for Information, open through March 18, 2013, on the topic of campus financial products, including student identification cards that double as debit cards, cards used to access scholarships and student loans, and school-affiliated bank accounts.  They are specifically seeking information on the following:

• What information schools share with financial institutions when they establish these relationships;
• How campus financial products are marketed to students;
• What fees students are being charged to use these products;
• How schools set up marketing agreements with financial institutions; and
• Student experiences using campus financial products in their day to day lives.

The CFPB has previously looked at student loans and financial aid offers, and has attempted to provide students with information and tools to evaluate the offers received.   For example, the CFPB website has published information to help educate students on the difference between federal student loans and private loans ,  and a tool to help graduates decide how best to repay their loans or what to do if  they miss a payment . 

Last year the CFPB published a report on private student loans based on input from students, their families, and from colleges and universities touching on the marketing, origination, repayment and  debt collection efforts with regard to private school loans.   In this 131 page report, the CFPB compiled statistics on student and families that sought private school loans, and comments on their experiences with those loans.  The Report concludes by making recommendations including  requiring school certification of private loans, the review of treatment of private school loans in bankruptcy, modernizing and clarifying the definition of a “private school loan” under the Truth-in-Lending Act, a mechanism for the borrower to understand a complete picture of their student loans, and a recommendation to determine whether additional data was needed to enhance consumer decision-making and lender underwriting for private school loans.  The CFPB assisted the Department of Education, which plans to publish a standardized  form for schools to use when awarding financial aid, which it claims will allow students to compare “apples to apples” when evaluating offers from different schools.  Until there is a standard form the CFPB provides a tool to compare offers.