On November 26, the CFPB sent a letter to student loan servicers offering them an opportunity to submit information about the options they make available to borrowers seeking to make extra payments on their private student loans. Last month, the CFPB recommended servicing policy changes and published a consumer advisory containing customizable, sample text that borrowers can electronically submit their servicers to indicate that they wish to allocate payments in excess of the amount due to their highest-rate loan in order to reduce their total interest paid. The Bureau states that it has since received inconsistent feedback from industry participants about the usefulness of this approach.
In response, the CFPB is now seeking additional information for use in responding to consumer inquiries and developing additional consumer education materials. The CFPB asks servicers to provide information about (i) the allocation of lump sum payments by the Department of Defense and other third parties on behalf of servicemembers or others seeking to direct lump-sum payments to specific loans; (ii) the percentage of borrower payments made through online bill pay systems and direct debit, and servicer practices related to borrower instructions provided with such payments; (iii) servicers’ ability to accommodate standing instructions for future excess payments; and (iv) the methods by which servicers communicate with borrowers about directing prepayments.
The CFPB plans to make the information its gathers public, but will not identify any particular servicer. Servicers that intend to voluntarily provide information in response to the Bureau’s requests are instructed to do so by December 17, 2013.TAGS: CFPB, Student Lending