Head of Consumer Watchdog Agency Talks Student Lending, For-Profit Colleges
Photo Credit: Veronica V photography via Wikimedia Commons
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Richard Cordray, the newly minted director of the Consumer Financial Protection Bureau, is ensuring some of the agency’s focus is placed on student debt.
The bureau announced that it will begin taking complaints from Americans who borrowed money to finance their education—whether difficulties in taking out private loans, repaying the debt, or managing loans that have gone into default. The move is a particularly important one for private borrowers as non-bank lenders had little federal oversight and often-lax regulations prior to Congress passing the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Campus Progress spoke with Cordray and the agency’s new Student Loan Ombudsman, Rohit Chopra, about the complaint system and what the bureau has in the works to help protect the rights of thousands of young Americans who borrow to pay for higher education. The edited interview follows.
Campus Progress: How will this new complaint system you’re implementing benefit young Americans who are saddled with student loan debt?
Cordray: Our sense is, from getting prepared to launch this effort, that federal student loan borrowers have gotten help over the years from the Department of Education but private student loan borrowers had really nowhere to turn and nowhere to seek help.
[With the new complaint system,] that has changed and they can come to us with their concerns and problems and seek help from us. We will stand on their side.
Among the things we are expecting and are interested in hearing about from them are trouble making full payments, any kind of confusion or misleading advertising or marketing of private student loans, billing disputes—which we find with all of our products get a high level of complaints—and issues around deferment and debt collection.
CP: What sort of enforcement mechanisms will be in place to ensure that lenders provide resolutions to borrowers’ complaints that actually provide relief? Essentially, what are the incentives for lenders to cooperate?
Cordray: There’s considerable incentive for them to cooperate, and our complaint function here works as it has with credit cards and mortgages. When we get a complaint, we route that complaint to the institution and give them an opportunity to address it. We’ve found both in the credit card and mortgage field that … when they get it from us it’s harder to ignore. [The financial institutions] make an effort; they have a timeframe they have to meet and it comes back to us.
If it’s been successfully resolved, great—we will check with consumers to understand their view of the [issue] as well. But if it hasn’t been resolved, then we will work the complaint.
If complaints are not resolved, or it’s an inappropriate resolution, we will prioritize those complaints for investigation and consider taking further action—which includes not only the ability to enforce the law, but use of that information to prioritize our examinations of different institutions.
That’s a very powerful tool for us—to be able to actually go out on the ground and of look carefully at [financial institutions’] operations, ask questions, and to see about the concerns that were raised in complaints.
CP: Will the information you get from the complaints also be used to shape any regulation or policy recommendations for Congress concerning the private student lending industry?
Very much so. The reality is that complaints to us are several things. They are for one, an individual opportunity to help the person complaining and better their situation. Second, they are a window into what’s going on out there and that’s incredibly useful for us.