Tag:student loan servicers

1
Increased Scrutiny On “Auto-Defaults”— Road To Enforcement Or Impetus For Change?

Increased Scrutiny On “Auto-Defaults”— Road To Enforcement Or Impetus For Change?

By: David E. Fialkow and Hollee M. Watson

Private student loan companies are at the center of increased scrutiny by the Consumer Financial Protection Bureau (the “CFPB”). Speaking at a recent conference, the CFPB student loan ombudsman Seth Frotman warned attendees that student loan companies are at risk of violating the law for placing borrowers in default when the co-signer of the loan dies or declares bankruptcy. See Danielle Douglas-Gabriel, Federal agency warns student loan companies about automatic defaults, The Washington Post (Mar. 8, 2016). This “auto-default” practice occurs when banks and other financial companies provide student borrowers with education loans that grant lenders or servicers the right to trigger a default upon a co-signer’s death or declaration of bankruptcy, even if the loan is paid on time.

Read More

Copyright © 2023, K&L Gates LLP. All Rights Reserved.