On January 20, the CFPB announced that it would begin examining the operations of post-secondary schools that offer private loans directly to students and update its exam procedures to include a new section on institutional student loans.  The CFPB highlights its concern about the student borrower experience in light of alleged past abuses at schools that were previously sued by the CFPB for unfair and abusive practices in connection with their in-house private loan programs.

When examining institutions offering private education loans, in addition to looking at general lending issues, CFPB examiners will be looking at the following areas:

• Placing enrollment or attendance restrictions on students with loan delinquencies;
• Withholding transcripts;
• Accelerating payments;
• Failing to issue refunds; and
• Maintaining improper lending relationships

This announcement was accompanied by a brief remark from CFPB Director Chopra:  “Schools that offer students loans to attend their classes have a lot of power over their students’ education and financial future.  It’s time to open up the books on institutional student lending to ensure all students with private student loans are not harmed by illegal practices.”

Putting it Into Practice:  The CFPB’s concern with the experience of student borrowers is in line with a number of enforcement actions pursued by the Bureau against post-secondary schools.  The education loan exam procedures manual is intended for use by Bureau examiners, and is available as a resource to those subject to its exams. These procedures will be incorporated into the Bureau’s general supervision and examination manual.

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