NAFCU Compliance Blog

CFPB Bulletin on Non-Discriminatory Access to Credit for Mortgage Applicants Who Receive Public Housing Assistance; Updated Mortgage Origination Examination Procedures; Public Inquiry into Student Loan Servicing Practices

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

CFPB Bulletin on Non-Discriminatory Access to Credit for Mortgage Applicants Who Receive Public Housing Assistance. The CFPB recently released Bulletin 2015-02, Section 8 Housing Choice Voucher Homeownership Program. The bulletin is intended to remind creditors “of their obligations under the Equal Credit Opportunity Act (ECOA)¹ and its implementing regulation, Regulation B,² to provide non-discriminatory access to credit for mortgage applicants using income from the Section 8 Housing Choice Voucher (HCV) Homeownership Program.³” (Footnotes omitted). The Section 8 Housing Choice Voucher Homeownership Program (Program), created to assist low-income, first-time homebuyers in purchasing homes, is funded by the Department of Housing and Urban Development and administered by participating local public housing authorities.

The Bulletin was issued in response to certain lending practices that have come to the attention of the CFPB – namely that some financial institutions have been excluding or refusing to consider income from the Program during the loan application and underwriting process, or only permitting Program vouchers to be used for certain mortgage loan products or delivery channels. The Bulletin reminds institutions of their fair lending obligations under ECOA and Regulation B regarding the treatment of income derived from any public assistance program. From the Bulletin:

“ECOA and Regulation B prohibit creditors from discriminating in any aspect of a credit transaction against an applicant “because all or part of the applicant’s income derives from any public assistance program.”⁶ “Any Federal, state, or local governmental assistance program that provides a continuing, periodic income supplement, whether premised on entitlement or need, is ‘public assistance’ for purposes of the regulation. The term includes (but is not limited to) . . . mortgage supplement or assistance programs . . . .”⁷ As such, mortgage assistance provided under the Section 8 HCV Homeownership Program is income derived from a public assistance program under ECOA and Regulation B.

Regulation B further provides that “[i]n a judgmental system of evaluating creditworthiness, a creditor may consider . . . whether an applicant’s income derives from any public assistance program only for the purpose of determining a pertinent element of creditworthiness.”⁸ However, “[i]n considering the separate components of an applicant's income, the creditor may not automatically discount or exclude from consideration any protected income. Any discounting or exclusion must be based on the applicant's actual circumstances.”⁹” (Footnotes omitted).

The Bulletin goes on to provide guidance on managing fair lending risk in this area, such as making sure underwriting policies are clearly articulated; training underwriters, mortgage loan originators and others involved in mortgage loan origination; and monitoring for compliance with underwriting policies. For complete details, the CFPB’s press release is available here and the Bulletin is available here.

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Updated Mortgage Origination Examination Procedures. Earlier this month, the CFPB also released updated mortgage origination examination procedures, which include guidance on how the agency will conduct examinations for compliance with the TILA-RESPA Integrated Disclosure Rule (TILA-RESPA). This document can be a handy tool for those working to implement TILA-RESPA requirements in advance of the August 1, 2015, effective date. For a complete run-down of NAFCU resources to assist those working to implement the rule, check out this blog by my colleague JiJi.

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Public Inquiry into Student Loan Servicing Practices. The CFPB has issued a request for information seeking comments from the public about industry student loan servicing practices; practices related to loan repayment, including practices related to student loan repayment for borrowers in distress; the applicability of consumer protections from other consumer financial product markets (such as consumer mortgages and credit cards) to student loan servicing; and input about the availability of data on student loan performance and on borrower characteristics during repayment. Comments are due to the CFPB on or before July 13, 2015.

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NAFCU Webcast: UCC Provisions Affecting Your Credit Union. The Uniform Commercial Code (UCC) impacts many of your credit union’s lending and payment processing activities—but the connection usually isn’t obvious until there’s a problem. Avoid this issue by being well-informed. Attend this detailed webcast to learn how various sections of the UCC affects the different operations of your credit union, from lending to dishonored checks. The webcast will be held on Thursday, May 21, from 2:00 p.m. – 3:30 p.m. ET. Register here.

CFPB’s Mid-Year Update on Student Loan Complaints

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

The CFPB Student Loan Ombudsman recently issued a mid-year report on student loan complaints.  The report focuses heavily on complaints received related to co-signer issues – primarily difficulties in removing co-signers from private student loans, and private student loan defaults that are automatically triggered by a co-signer’s death or bankruptcy filing. From the CFPB’s press release:

“Among the issues that consumers face:

• Auto-defaults when a co-signer dies: Many consumers assume that the death of a co-signer, often a parent or grandparent, will result in the release of the co-signer’s obligation to repay. But many private student loan contracts provide the lender with the option to immediately demand the full loan balance upon death of the co-signer. These auto-defaults may be occurring when data from probate and other court record scans are matched with a financial institution’s customer database, without regard to whether the borrower is in good standing. These defaults are also typically reported to credit bureaus and negatively impact the credit profile of a borrower.

 

• Auto-defaults when a co-signer enters bankruptcy: Many private student loan contracts also allow the lender to place a loan in default if the borrower’s co-signer files for bankruptcy. Even if the loan was in good standing prior to and while the co-signer is in bankruptcy, borrowers submit complaints detailing how they face auto-defaults, including consequences such as credit damage and frequent debt collection calls.

 

• Obstacles to releasing co-signers from the loan: Borrowers face bureaucratic barriers when seeking to release their co-signer, even though this benefit was advertised before the loan was taken out and could help avoid auto-default. Consumers continue to complain that the rigid and opaque standards for co-signer release make for a mysterious process. For example, consumers note that required forms are often not available on websites or in an electronic form. In addition, servicers do not seem to be proactively notifying consumers about the specific requirements to process a release.”

Despite the lack of information about the actual prevalence of these issues in the student loan market as a whole (see page 9 of the report), and even noting that acceleration and default clauses triggered by the death or bankruptcy filing of a co-signer “may be rational for a creditor,” the ombudsman states that this practice on an otherwise performing loan “warrants review by investors and management.”  The report also goes so far as to comment that “reasonable observers” might ask why private student loan lenders don’t do more before pushing a borrower into default and acceleration, such as determining if a borrower qualifies for a co-signer release, or honoring the existing payment schedule for a designated time period so that borrowers can identify a new co-signer or refinance the loan.

From the report:

“Inclusion of these clauses may be rational for a creditor. However, the practice of accelerating a loan and immediately demanding the full balance upon the death or bankruptcy of a co-signer on a loan that is otherwise performing warrants review by investors and senior management.⁷

Some industry participants rely on third parties who conduct scans of public records of death and bankruptcy filings, which are then electronically matched to customer records and trigger a default, regardless of individual circumstances. Financial institutions face several risks with this approach.

Reduction of interest income: For a loan where the primary borrower has been making on-time payments for a lengthy period of time, placing the loan in default and demanding the full balance will almost certainly reduce the interest income over the life of the loan.

Reduced recovery of principal: Borrowers that have been making on-time payments for a lengthy period of time may not be able to cover the full amount of the loan immediately after a co-signer’s death or bankruptcy. To the extent that this results in the failure of the servicer or lender to recover the full amount of the loan, or results in higher collection costs per dollar recovered than would have been incurred using the normal payment schedule, automatic defaults may lead to lower recoveries of principal balances.

Poor customer experience: For a borrower who has proven to be a responsible paying customer and is facing the death of a parent or grandparent co-signer, debt collection calls demanding the full balance with limited explanation will probably not be welcomed. This might substantially reduce the willingness of the borrower to pursue other credit products with the financial institution.

Reputation: The deployment of debt collection protocols on an otherwise-performing loan in a time of a family tragedy may give the impression that a private student lender or servicer is inadequately managed or simply unwilling to work constructively with borrowers.

While these acceleration options may have a legitimate business purpose, it seems that private student lenders and servicers may not always be acting in their own self-interest by accelerating balances and placing loans in default. Since lenders and servicers typically have the option to place the loan in default, there are several alternatives worthy of further evaluation that may not only benefit consumers but also lenders and servicers.

•  A private student loan servicer can seek to determine whether the borrower qualifies for cosigner release and maintaining the existing payment schedule would be beneficial for all parties.

 

• The lender or servicer could provide an opportunity for the borrower to obtain another creditworthy co-signer. In many cases, the widowed parent or other elative may be a suitable substitute.

 

• The lender could notify the borrower the existing payment schedule will be honored for a designated period of time before the entire balance is demanded. This would allow the borrower to apply for a new loan (perhaps with a new co-signer such as the widowed parent) or to seek a refinance option with a different lender with new terms.

Reasonable observers might ask why these options are not more commonly employed. We do not know the extent to which lenders and servicers regularly use any of these alternative practices, but acceleration seems to be used by the bulk of industry participants. In addition, pooling and servicing agreements governing the actions of servicers for loans held in securitized trusts may provide additional complexity in these situations.” (My emphasis) (Footnotes omitted).

My take….they don’t know how prevalent these co-signer related problems are in the student loan market, and because they don’t know how often private student lenders try to help out borrowers in these situations, acceleration must be the norm. And apparently it’s not just consumers, but lenders as well, who don’t know how to act in their own self-interests. Laying the groundwork for future rulemaking on private student loan servicing? I’ll let you be the judge of that.

January 2014 NCUA Report; Private Student Lending

Written by Bernadette Clair, Senior Regulatory Compliance Counsel

Last week, the NCUA released its January 2014 report. Featured articles include:

• Office of Examination and Insurance Report: Supervision to be Forward-Looking, Targeted in 2014
• Chairman’s Corner: It’s Time to Flip the Calendar – from 1934
• Filing Your Call Reports Late Could be Costly
• Board Perspectives: Bursting Bubbles; ETA on EMV is Still TBA
• Board Actions: NCUA Board Approves New Charitable Accounts for Federal Credit Unions
• Understanding Loan Participation Waivers
• Region II Report: Private Student Lending – Looking Beyond Default Insurance
• Low-Income Credit Unions Can Apply for First Grant Round Starting Feb. 3
• Get Ready. Military and America Saves Week is Feb. 24 – March 1

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Private Student Lending. Earlier this month, we blogged about NCUA Letter to Credit Unions 14-CU-02, which lays out NCUA’s supervisory focus for 2014. Private student lending is on the list and NCUA states in the letter that field staff “will evaluate each credit union’s student lending plans, policies, controls, and third-party due diligence.”  In December 2013, NCUA also issued Letter to Credit Unions 13-CU-15, specifically on the topic of private student loans, and the enclosed Supervisory Letter No. 13-13 provides guidance to field staff on examining credit unions’ private student lending practices.

This month’s NCUA report also addresses private student lending in the Region II Report: Private Student Lending – Looking Beyond Default Insurance, highlighting issues examiners observed in 2013. These include reliance on default insurance, effective credit analysis of borrowers’ ability to repay their loans and effective due diligence of third party participants. Here’s an excerpt from the article that caught my eye related to default insurance:

“NCUA expects credit union management to establish appropriate policies and controls that are independent of default insurance protections. This includes concentration limits, exit strategies, liquidity impact and interest-rate risk management within the private student loan portfolio.

Default Insurance

Many credit unions make use of default insurance to protect the credit union against loss if a private student loan is not repaid according to contract terms. The use of default insurance can be an effective way to mitigate credit risk, assuming the credit union:

• Performs proper due diligence of the default insurers;
• Understands the terms of the insurance contract;
• Is aware of the conditions required of the lender, servicer or both, to keep the insurance in force; and
• Properly assesses the financial capacity of the insurer.

Credit unions need to ensure the private student loan program they participate in fits their lending policies and underwriting requirements. Credit unions must perform adequate credit analysis consistent with their credit union’s individual risk tolerances. NCUA examiners will verify whether a credit union has the appropriate expertise and risk-mitigation controls for private student lending, regardless of default insurance.”

Be sure to give NCUA Letter to Credit Unions 13-CU-15, Supervisory Letter No. 13-13, and the article in this month’s NCUA Report a read if your credit union makes private student loans.

CFPB Releases Semiannual Regulatory Agenda--Fall 2013

Written by Brandy Bruyere, Regulatory Compliance Counsel

Happy Monday compliance folks! My name is Brandy Bruyere and I am one of two new Regulatory Compliance Counsels here at NAFCU. As this is my first blog post, and it's Monday, we'll start with something short.

Last week the CFPB posted its Semiannual Regulatory Agenda for Fall 2013. This agenda provides insight into which regulations the CFPB will focus on over the next six months. The agenda is organized by rulemaking stage and is current as of September 6, 2013.” Here is the list of various regulations by stage:

Prerule State:

• Home Mortgage Disclosure Act (Regulation C)
• Annual Privacy Notice
• Payday Loans and Deposit Advance Products
• Debt Collection Rule
• Overdraft
• Further Amendments to 2013 Mortgage Rules (Regulations X and Z)

Proposed State:

• Requirements for Prepaid Cards (Regulation E)
• Supervision of Certain Nonbank Covered Persons—Defining Larger Participants in Certain Consumer Financial Product and Service Markets
• Amendments to FIRREA Concerning Appraisals
• Extension of the Temporary Exception for Certain Disclosures Under the Remittance Transfer Rule

Final Rule Stage:

• Restatement of Federal Consumer Financial Law Regulations
• Amendments to TILA Concerning Appraisals
• Integrated Mortgage Disclosures under RESPA (Regulation X) and TILA (Regulation Z)
• Equal Access to Justice Act Implementation Rule
• Rules of Practice for Issuance of Temporary Cease-and-Desist Orders
• The Expedited Funds Availability Act (Regulation CC)
• Defining Larger Participants of the Student Loan Servicing Market*
• Amendments to 2013 Mortgage Rules (Regulations B, X, and Z)

* Since releasing the agenda last week, the CFPB has published a final rule on “Defining Larger Participants of the Student Loan Servicing Market.”

The CFPB blog announcing the release of the agenda also highlights certain pending rulemakings such as regulation of prepaid card products and its expectations to release a proposal to reduce the annual privacy notices customers must receive. The blog also discusses areas the agency will consider in 2014 for potential regulation such as debt collection, payday loans and deposit advance products.

CFPB Focusing on Students (and Private Student Loans); Free UDAP Webinar

Written by Steve Van Beek

The CFPB recently reiterated their focus on financial products offered to students.  A brief discussion of two current efforts is below. 

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CFPB Inquiry into Campus Products.  In late January, the CFPB launched an inquiry into the financial products marketed to students through colleges and universities.  If your credit union has a relationship with a local college or university (or if you CU is sponsored by one!), be sure to keep an eye on this issue.   

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CFPB Focusing on Private Student Loans.  The CFPB has not been shy when indicating they will be focusing heavily on private student loans.  If your credit union makes private student loans, be sure to track the CFPB’s actions and ensure you are ready for future changes.  On February 21, the CFPB penned two blog posts on student loans.  The first looked at student debt and schools.  The second was titled “Help Stop the Student Debt Domino Effect.”  The CFPB also announced a new Notice and Request for Information on the student loan market.  NAFCU’s Regulatory Affairs team will be providing a Regulatory Alert on this request for information and will also be drafting a comment letter to the CFPB. 

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Free UDAP Webinar.  On March 5, The Philadelphia Federal Reserve’s Consumer Compliance Outlook will feature a free webinar on UDAP - Analysis, Examinations, Case Studies, and Emerging Risks.  The webinar will look at:

• Consumer Financial Protection Bureau (CFPB) UDAAP and Federal Reserve Bank UDAP legal authorities

• UDAP legal analysis and examination procedures

• UDAP and bank holding company risk

• Case studies and emerging areas of risk

• Recommendations for implementing an effective UDAP compliance program

The webinar will start at 2:00 p.m. EST on March 5th.  With the CFPB’s future actions in this area unknown, be sure to tune in.

Mortgage Headache Areas; Upcoming Mortgage Reform Webcasts

Written by Steve Van Beek

Yesterday was NAFCU's first webcast as part of our Mortgage Reform Webcast Series.  I provided an overview of the seven new mortgage regulations - focusing specifically on the scope & applicability of the new requirements.  

I also provided some insight on "Headache Areas" and included this list at the end of the presentation:

• Determining Exemption Applicability

• New Notices – Content-Rich and Strict Timelines

• Error Resolution & Information Request Procedures

• Loan Originator Compensation Determinations

• Implementing So Many Changes At One Time

And, there will be many additional headaches as credit unions work toward implementing the new requirements.  Even self-induced ones.  

There is some hope on the horizon as the CFPB issued their best press release of their history which highlights their Implementation Plan for New Mortgage Rules.  The CFPB's plan indicates they are listening to NAFCU and credit union concerns regarding the overwhelming burden of reading, understanding, interpreting and implementing numerous requirements simultaneously.  Of course, we'll have more information on the CFPB's plan in future blog posts.

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Upcoming Mortgage Reform Webcasts.  As I mentioned, yesterday's webcast was the first of our series and registration for the next three is now open.

• CFPB's Ability to Repay and Qualified Mortgage Requirements - March 6, 2013 - 2:00 p.m. to 3:30 p.m.

On March 6, Andy Keeney from Kaufman & Canoles will be examining the details of the CFPB's Ability-to-Repay Requirements and Qualified Mortgage Standards.  Andy will walk through the new underwriting guidelines - including the debt-to-income requirements - and explain how these rules will impact credit union mortgage lending.  And, importantly, the steps your credit union needs to take to comply by January 10, 2014.  

• Digging Deeper: CFPB's Mortgage Rules - March 27, 2013 - 2:00 p.m. to 3:30 p.m.

I'll be joined by my colleagues JiJi Bahhur, Bernadette Clair and Mike Coleman as we explore details of the CFPB's new mortgage requirements.  We'll provide answers to Frequently-Asked-Questions that our team has fielded from NAFCU member credit unions.  And, we'll take a look ahead at what other areas the CFPB is likely to address in 2013.  

• Which New Requirements Apply to HELOCs? - April 10, 2013 - 2:00 p.m. to 3:30 p.m.

I'll provide a detailed look at which requirements apply to home equity lines of credit and - just as importantly - which do not apply so that your credit union can best position your implementation strategy.  If your credit union makes HELOCs, this is one you'll want to attend as the new requirements are sprinkled throughout the CFPB's 3507 pages!

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Programming Note:  NAFCU's offices will be closing early tomorrow and will be closed on Monday for the Federal holiday.  We'll have a blog post tomorrow and then start back up again on Tuesday.   

CFPB Sharing Complaint Data; Unverified Complaints; Feedback on NCUA Process

Written by Steve Van Beek

Back in mid-December, the CFPB announced it would be sharing consumer complaint data with state regulatory agencies.  They also note that this is just the beginning:

"In the future, we’re planning on building ways to accept complaints and information from the agencies as well, and to make the data available to other federal agencies, state attorneys general, local agencies, congressional offices as appropriate, and other governmental organizations like the California Monitor (a program of the California Attorney General) and the Office of Mortgage Settlement Oversight."

The announcement then goes on to provide a summary of the CFPB's complaint process:

"What happens when I file a complaint?

When a consumer files a complaint, we screen it to make sure that it’s complete and not a duplicate of another complaint we’re already working on for that consumer. Next, we send it to the company in question and ask them to reply to the complaint within 15 days and expect them to close all but the most complicated complaints within 60 days. After the company responds, we publish a selection of the data (with information identifying the consumer removed) in our public Complaint Database."

You'll easily notice that there is no verification process.  And, the Complaint Database's disclaimer doesn't exactly jump off the page.  Of course, this is an issue we've discussed over and over on the blog - so much so that we have a Member Complaints category.  

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Initially, it is important to remember that credit unions under $10 billion are not included in the Consumer Complaint Database.  The CFPB will forward any complaints from these credit unions to NCUA and credit unions will need to follow NCUA's procedures for responding to member complaints (more on this at the end of the blog post).  

Unverified Complaints.  So, what is the big deal with unverified complaints?  The reputation risk issue is one that cannot be ignored.  In this age of viral media - where a simple complaint or issue can fly through blogs, Facebook, Twitter - it is much harder to correct inaccurate information.  Sometimes, once the story is out there, it is....well, out there.  

But, there is another angle that could be even more dangerous.  The CFPB's Annual Report on Student Loans and the companion report - The Next Front? Student Loan Servicing and the Cost to Our Men and Women in Uniform - both use consumer complaints as a focal point to help show the current regulations or enforcement is insufficient.  

The latter quotes directly from consumer complaints, for example:

        
That comes from page 5 of the Report.  An earlier quote includes this footnote:  "This report cites information from specific complaints submitted to the CFPB. In these cases, the consumers have provided consent to include the details of their complaints."

Again, there is no mention of verification of the complaints.  I'm interested, was the rate incorrect?  We don't know.  But, the CFPB is implying it was by including one side of the story.  Remember:  The institution - whichever institution this was from - is prohibited by privacy laws from providing any information about the member's account.  So, we have the one side of the story.

Of course, I'm not saying these complaints are not true.  I'm just saying they are unverified (if they were verified, the CFPB should include that information).  

And, I'm not saying that institutions always do everything correctly.  For example, if this complaint is accurate - the institution has a lot of work to do:

"According to a complaint received by the CFPB, one borrower had six loans with a servicer, two of which had interest rates above six percent and four of which had interest rates below six percent. Instead of reducing the interest rate on the two higher-rate loans to six percent and leaving the four lower-rate loans untouched, the servicer simultaneously increased the interest rate on the lower-rate loans up to six percent."

Or, it could have been a mistake that was quickly corrected by the institution.  We just don't know.

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The New Cycle?  The reason I bring this up is that this seems to be the start of a new type of regulating that credit unions need to be aware of.  Or, at the least it is a new type of justifying the need for new regulation.  

Think about it.  The CFPB is soliciting consumer complaints (remember the flashing red "complaint button" on their first website?)  Then, they write a report (usually to Congress) using the complaints to argue there are issues that need to be corrected.  There might also be testimony to explain the report and what they've found.  After that?  Well, it might just be that the reports help build the case for a new regulation (or a new law from Congress).  All with unverified consumer complaints.  

At this point, we don't know.  But, the CFPB seems to be falling short of their data-driven analysis goal:

"The CFPB is a data-driven agency. We take in data, manage it, store it, share it appropriately, and protect it from unauthorized access. Our aim is to use data purposefully, to analyze and distill data to enable informed decision-making in all internal and external functions."

And, remember - the new requirements that come from these new regulations or laws will not be limited to credit unions with more than $10 billion in assets.  The new requirements will apply to everyone.  

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NCUA Complaint Process.  Taking a little different angle here.  We've detailed the NCUA Complaint process a couple of times on the blog.  Most recently here and here.  What we are interested in from blog readers is if there are areas NCUA could improve?  If so, please let us know.  We'll be sure to raise the issues with NCUA and see if some of the issues can be smoothed out.  

CFPB Report on Private Student Loans

Written by Michael Coleman, Regulatory Compliance Counsel

On Monday we blogged about a report on private student loans released by the CFPB's Student Loan Ombudsman. Today we would like to take a closer look at some of the details of the report. The report indicates that the current outstanding student loan debt is now over $1 trillion, with private student loans accounting for more than $150 billion (15% of the debt).  Furthermore, there are at least $8 billion of private student loans in default, representing more than 850,000 individual loans.  Student loans have now surpassed credit cards as the largest source of unsecured consumer debt. 

The report highlights and summarizes the information and complaints received by the CFPB concerning the student loan marketplace. The CFPB received approximately 2,900 complaints and other submissions from consumers concerning private student loans, the vast majority of which (95%) were about loan servicing. The report summarized some of the issues borrowers identified in their complaints:

"Inability to speak with personnel empowered to negotiate a repayment plan.  By far, the most common concern communicated by borrowers has been the difficulty negotiating a repayment plan with their servicer in periods of unemployment, underemployment, or financial hardship.  Many borrowers report frustration that they are unable to identify appropriate personnel that can make a determination about their repayment options.

Inability to refinance. Many student loan borrowers have a limited credit history when applying for a private student loan— and their interest rate reflects a high level of risk.  But as borrowers build a credit profile, graduate, and earn income, they are often unable to refinance existing student debt at a lower rate— in stark contrast to the market for mortgage refinance products. We have heard from borrowers who say they are looking for loans with more attractive terms, but many have been unable to take advantage of today’s historically low rates. 

[…]

Inability to access repayment plans previously advertised.  Many private student loan borrowers are able to enroll in alternative repayment arrangements included in the terms and conditions of their loans.  However, some borrowers note that enrolling in a new repayment arrangement is a difficult process.  Some servicing personnel may not be fully aware of all policies or incentive plans available to private student loan borrowers. "

The report also featured a discussion from the CFPB Student Loan Ombudsman on the issues identified in the complaints. One point raised was that the complaints received concerning student loan servicing bore a striking similarity to the complaints received concerning mortgage loan servicing. Another focused on the difficulty that borrowers face in modifying or refinancing student loans, and that the CFPB would welcome "creative efforts by lenders to help borrowers restructure their debt prior to or after default."

In the discussion the CFPB Student Loan Ombudsman had this to say about credit unions' participation in the private student loan market: 

"Community Banks and Credit Unions

A number of leaders from small financial institutions have expressed interest in developing longterm relationships with young customers but note that many of them are unable to enter the mortgage market due to their student loans.  One way that small financial institutions might assist younger customers to get closer to homeownership is to offer products that allow them to refinance any student loans they might have with rates in excess of their perceived repayment risk.  Small financial institutions might even be able to assist customers worried about falling behind on student loans by offering products that might allow them to be successful.  

The CFPB received very few complaints from borrowers with private student loans from small financial institutions.  Increased participation by small financial institutions might benefit the market." (emphasis added)

The report notes that 87% of the complaints were directed at just 7 companies (take a look at Table 2 on page 5 of the report), which is not surprising considering the concentration of the market. However, as the report indicates, the CFPB received very few complaints from borrowers with private student loans at credit unions, and that increased participation by credit unions in the private student loan market might be beneficial. 

The CFPB also released a fact sheet and press release regarding the report. 

CFPB Report on Private Student Loans; CFPB Remittances Webinar; NAFCU's Offices Closed

Written by Steve Van Beek

We'll keep this blog post brief as we’ll have additional information on the CFPB reports in future blog posts.

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Private Student Loan Report.  On October 16th, the CFPB issued a report on private student loans.  Here is from the press release:

"Today’s report, which was mandated by Congress, analyzed approximately 2,900 private student loan complaints, comments, and other submissions and input from borrowers. The report found that roughly 95 percent of the complaints are about loan servicing – when borrowers try to pay back their debt or are unable to pay."

The report is available here.  A fact sheet is available here.   

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Student Loans and Servicemembers.  On October 18th, the CFPB issued a report on student loans and servicemembers.  Prominent in the report were discusses of student loans and the SCRA:

"Many servicemembers navigate hurdles that may be unnecessary in order to receive the SCRA interest rate cap. Once a borrower has qualified for this interest-rate cap, the SCRA requires the servicer to continue to provide this benefit for the duration of the servicemember’s time on active duty, as reflected in the servicemember’s orders. We have received complaints from servicemembers, on active duty for multiple years, who reported that they were told that their interest-rate cap would expire annually, and were subsequently required to submit  additional orders in order to retain this benefit."

The report is available here.  The CFPB also released a Guide for Servicemembers with Student Loans.  

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CFPB Remittances Webinar.  If you missed the CFPB's webinar on remittances, you can view the archive here (slides are here).  The Small Entity Compliance Guide is also available.

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NAFCU Closed.  NAFCU follows the Federal Government Operating Status and our offices will be closed today due to Hurricane Sandy.  NAFCU Members:  If you have compliance questions, please email us at [email protected].  If you call, please leave a voicemail and we'll get back to you as soon as we can.   

For those in and around the Hurricane area, be safe!

NAFCU Today: On the Hill; Derivatives; CFPB Expands Complaint Program

Written by Steve Van Beek

As we mentioned on Friday, the NAFCU Compliance Team will be in and out of the office this week as we'll have nearly 150 compliance officers in town for our Regulatory Compliance School.

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NAFCU Today.  I wanted to pass along a couple of recent stories from the NAFCU Today which is written by NAFCU's Communications Team.  If you or someone at your organization wants to receive this daily news feature, you can subscribe to the NAFCU Today here.

As with the Compliance Blog, the NAFCU Today is open to everyone that is interested in learning more about issues impacting credit unions.

Member Business Lending.  Grassroots efforts initiated to urge support of S. 509 - the Small Business Lending Enhancement Act.  

Exam Bill.  Senate bill S. 2160 has been introduced.  This bill is a companion bill to H.R. 3461 and would bring additional transparency and consistency to bank and credit union examinations.    

CFPB Complaints.  The Consumer Financial Protection Bureau has recently expanded their complaint process and are now accepting complaints on consumer checking accounts and private student loans.  

Note:  All the links below will take you to recent NAFCU Today stories.  To see the March 12 edition of the NAFCU Today, you can go to the NAFCU homepage.