|February 17, 2014|
Previously published on February 11, 2014
On February 3, 2014, the CFPB’s Student Loan Ombudsman, Rohit Chopra, wrote a letter1 summarizing the responses he received to a November 2013 request he issued to private student loan servicers in which he asked them to voluntarily describe their payment processing policies. The November request reflected the CFPB’s concerns as to whether servicers can and do honor borrowers’ instructions for servicers to direct the payments they make above monthly minimums to pay down particular loans.
Among the key findings in the Ombudsman’s February 3rd letter were the following:
Many servicers say that they cannot honor specific payment allocation instructions communicated through online or third-party bill pay services that borrowers often utilize to remit their payments.
Many servicers are not well-equipped to process borrowers’ payment instructions when third parties, such as the Department of Veterans Affairs, make loan payments on behalf of borrowers, such as servicemembers and veterans who receive educational benefits under the GI Bill.
Some servicers have recently changed their payment allocation policies to process borrowers’ payment instructions or to otherwise allocate payments from borrowers in excess of the monthly minimums to pay down loans with the highest interest rates.
Many servicers indicated that they are working to better communicate their payment processing policies to their customers.
1 See the letter here- http://files.consumerfinance.gov/f/201402-cfpb-letter-payment-processing.pdf.