The Consumer Financial Protection Bureau is taking steps that would give it power over some of the country's biggest nonbank student lenders.
These are the lenders who are contracted by banks and the government to manage federal and private student loans.
The problem is borrowers don't have a choice over which institution services their loan, and the servicer is often different than the lender itself.
Servicers collect debt payments from borrowers and distribute them to loan holders, and although the CFPB has been fielding complaints from students against these nonbank lenders, they haven't had any power over making sure they play by the same rules as traditional lenders.
If approved, the new rule would give it that power over the seven largest nonbank student lenders in the country, which carry a total of 49 million student accounts.
"The exercise of this new authority would help protect millions of student loan borrowers from potential dead ends," CFPB Director Richard Cordray said during a conference call Thursday. "In many ways, a student loan can make or break a student’s financial lives."
The public now has 60 days to give the bureau their input on the new rule. See the full proposal here.
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