US regulator says student loan complaints resemble mortgage woes
WASHINGTON Oct 16 (Reuters) - Some private student loan borrowers who are struggling to repay their debts are facing the same frustrations with servicers that have plagued mortgage borrowers, the U.S. consumer agency said in a report released on Tuesday.
These student loan borrowers have complained about being charged extra fees, being unable to figure out who owns their loans, and never being able to get a representative who could assist them on the phone.
They have also experienced improper deductions of payments from their bank accounts, among other servicing issues, the Consumer Financial Protection Bureau said.
Similar complaints, common in the mortgage servicing industry for years, led to a landmark $25 billion settlement with top banks earlier this year.
The student lending report compiles some 2,900 complaints the agency has received from March, when it begin accepting complaints, through September. The 2010 Dodd-Frank financial regulation overhaul established a student loan ombudsman at the CFPB to help borrowers with private student loan complaints.
"Graduates don't have a fair chance to pay back their debts if they are faced with surprises, runarounds, and dead-ends by student loan servicers," said CFPB Director Richard Cordray.
The report, from the CFPB's student loan ombudsman Rohit Chopra, recommended that Congress help increase student borrowers' ability to modify or refinance their loans.
The report also suggested that the CFPB examine whether it could use ideas from efforts to fix mortgage servicing problems to address student loan issues.
The vast majority of the new complaints - 95 percent of them - related to how the loans were serviced, the agency said.
Outstanding student loan debt stands at more than $1 trillion, the agency said.
Private loans don't come with the same protections that federal loans do, the CFPB said, including options for income-based repayment plans or discharge of debt upon death.
In July the agency along with the Department of Education released a report that found that borrowers who took out private student loans in the run-up to the financial crisis are facing high levels of default, reflecting the risky lending practices at the time.
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