The U.S. consumer financial watchdog will soon start supervising the seven largest student loan servicers to ensure they treat borrowers fairly and comply with federal consumer laws, The Economic Times reported.
Under a new rule scheduled to take effect March 1, the Consumer Financial Protection Bureau would expand its supervision to non-bank student loan servicers that handle more than 1 million accounts, regardless of whether they include federal or private loans.
The agency already supervises student loan servicing by large banks with more than $10 billion in assets.
Iowa Student Loan, which is based in West Des Moines, already works closely with the CFPB, said Tara Deering-Hansen, a spokeswoman. The new federal rule won't directly affect the nonprofit, which services approximately 700,000 borrowers in total, she said.
"We've been working closely with the CFPB and providing them with information about our operations and practices, and we will continue to do that," she said.
Iowa Student Loan's wholly owned subsidiary, Aspire Resources Inc., in April 2012 expanded to provide servicing for 200,000 federal borrower accounts across the country, through a 2010 change in the law that enabled nonprofit agencies to provide loan servicing. Aspire now handles about 500,000 federal student loan accounts, Deering-Hansen said.
The CFPB said it has found student loan borrowers are dealing with similar problems with servicers as homeowners encountered with loan servicers. Student loan borrowers have complained about lost paperwork, poor communication and processing mistakes by servicers that have resulted in unnecessary late fees.
The seven largest companies, among them Sallie Mae, service more than 49 million accounts and account for a majority of the student loan market. The CFPB said it will also look into smaller companies if there is a reasonable cause to do so.