U.S. consumer regulator looking at student loans

Wed Nov 16, 2011 1:53pm EST

* CFPB says too little known about private student lenders

* Agency preparing report for Congress on private lending

By Dave Clarke

Nov 16 (Reuters) - The new U.S. consumer financial agency is setting its sites on the private student lending industry, announcing on Wednesday that it is seeking information on how to oversee these lenders.

The agency said in a release that "too little is known" about college student loans made by private lenders as opposed to those that go through programs run by the government.

"It has been operating in the shadows for too long," Raj Date, the Treasury Department adviser who is running the Consumer Financial Protection Bureau, said in a release. "Shedding light on this industry will benefit students, lenders, and the market as a whole."

On Wednesday the agency put out a request for information on industry practices such as loan underwriting criteria, repayment terms and what efforts are made to prevent defaults.

The agency will seek input from the public and the industry for 60 days.

Private student lenders include large banks such as JPMorgan Chase and Wells Fargo and non-banks like Sallie Mae , the largest U.S. student lender.

Americans owe more on student loans than on their credit cards, with total outstanding student loans expected to top $1 trillion this year, according to data from the Federal Reserve of New York.

The 2010 Dodd-Frank financial oversight law, which created the bureau, requires the CFPB and the Education Department to produce a report on the private student loan industry by mid-2012.

The bureau is charged with policing markets for credit cards, mortgages and other financial products.

While CFPB opened its doors in July, under the law it is restricted from carrying out some of its mission until the Senate confirms a director to lead the agency.

Until a director is in place, for instance, the CFPB will not be able to supervise private student lenders that are not banks.

President Barack Obama in July selected former Ohio Attorney General Richard Cordray to lead the bureau but his nomination has been caught in the crossfire of a political fight between Republicans and Democrats over how much authority the agency should have.

Senate Republicans are promising to block Cordray's nomination until changes are made to the agency's structure, such as having it run by a board rather than a director.

Senate Democrats and the Obama administration oppose the changes, arguing they would weaken the watchdog.

Republicans and banks accuse the agency of regulatory overreach.

Democrats praise the bureau as a much-needed check on lending abuses and say it will give people clearer choices and more information about the financial products they use.

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