FROM “CAV

EAT EMPTO

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TO “C

AVEAT

VENDITO

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C ON S U M

E R F I N A N C I A L P R OT E C T I O

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A ND T H E C O

L L E G E S T U D E N T

D I A N A MA T E E R , U A T

ED’S NEW PARTNER-- THE “CFPB”

o Consumer Financial Protection Bureau (CFPB)o Established as part of Dodd-Frank Wall Street

Reform and Consumer Financial Protection Act passed in July 2010

o “Watchdog” partner of other agencieso Response by President Obama and Congress to :

-- Role of uninformed consumers in financial crisis

-- Need to monitor actions of providers of financial

products and services, and that includes higher

education institutions!

A BRIEF HISTORICAL PERSPECTIVEo The movement from caveat emptor to caveat venditor

-- College students became a consumer class of interest

*Private student loan customers*Users of taxpayer dollars*Buyers of higher education services

o Perceptions that students need consumer protections in part because:

--Predatory schools and lenders exist---First generation college students can’t rely on family

experiences to help them choose---Veterans are vulnerable ---People may be misled when looking for a quick fix

to unemployment

ENTER THE CFPB….o Entire sections of CFPB legislation devoted to private loans

--Private Student Loan Ombudsman (Rohit Chopra)--Authority to regulate private student loans

*Rulemaking*Program review of private student loan lenders

o Another section of legislation devoted to veterans’ services--Office of Service Member Affairs directed by Holly Patraeus

o Veterans’ Principles of Excellence--CFPB consults on enforcement of principles and institutional compliance with them

o Know Before You Owe--Philosophy of comparison shopping---Establishes partnership between CFPB and ED

THE CFPB AND PRIVATE STUDENT LENDING

o Born from concern that many students do not exhaust federal aid eligibility before turning to private education loans

--Studied this premise in CFPB’s first private loan reporto Private loans are hard for students to compare and keep track of

--Private loans not on NSLDSo Students need an advocate (private loan ombudsman) and a formal complaint

mechanism--CFPB established both

o Private lenders need to be monitored to assure compliance with existing consumer lending laws

-- CFPB has this authority

o Students need help getting a clear picture of their total student loan repayment

--Student Debt Repayment Assistant

CFPB AND ED ISSUE PRIVATE LOAN REPORT

o Required report to Congress issued in July 2012-- Studied the borrowing boom from 2004-2008*Compared lending practices to subprime housing market*Characterized by direct-to-consumer marketing*Non-bank lenders grew fast, and died even faster

o Joint recommendations for private loans made by CFPB and ED

-- Mandatory school certification-- More debt management and mitigation options -- Change definition of private loan-- NSLDS type of private loan tracking system

ANOTHER REPORT ISSUED BY CFPB IN 10/12

o Ombudsman reports 2,900 complaints received since March 2012

-- 65% related to servicing (billing, deferment/forbearance, credit reports-- 30% problems when unable to pay (default, debt collection)-- 5% loan origination & marketing (difficulty applying, borrower

confusion)

o Fast-forward to March 2013-- Consumer Financial Protection Bureau proposes rule to oversee nonbank

student loan servicers (both federal and private “larger participants” that handle more than 1 million borrower accounts)

-- NPRM proposes that CFPB oversee servicer activity for compliance with federal consumer financial laws tio curtail “confusion, dead-ends, and run-arounds

CFPB’S OFFICE OF SERVICE MEMBER AFFAIRS

o Service Members and Veterans are protected class under CFPB

-- Service members subject to sudden deployment

-- They are frequently relocated-- They have emergencies that lead to

unplanned and unique financial issues

o They deserve consumer protection to-- Honor their service commitment to

country-- Protect their government funded benefits

VETERANS’ PRINCIPLES OF EXCELLENCEo Executive Order signed by President Obama in April

Aimed at Schools-- Service members, veterans, and their families are targets for deceptive, aggressive tactics by some education institutions* They have “easy” access to funds for education costs from VA benefits* VA benefits count toward the 10% in 90-10 rule*Hard time exercising student loan repayment protections

o Institutions “voluntarily” committed to sign Principles of Excellence

-- Institutions that signed listed on VA web site

CFPB & ED TEAM UP TO CREATE FINANCIAL AID SHOPPING SHEET!

FINANCIAL AID SHOPPING SHEETo “Model of what all financial aid award offers

should be”-- Standard format-- Comparison data for institutions

(provided by ED 1/18)*Graduation rate*Default rate*Median borrowing & monthly

payment, link to loan repayment informationo More than 700 institutions representing more

than 1.8M undergraduate students to use in 2013-14

o If you signed Veterans’ Principles of Excellence, you must use for military students

USE OF SHOPPING SHEETo Marketing Toolo Add-on to Net Price Calculatoro Replacement to Financial Aid Award Offero Supplement to Financial Aid Award Offer

Do you plan to use the Shopping Sheet at your school,

and if so, how

QUESTIONS