Private Student Loan Providers Soon to be Under CFPB Scrutiny

You know how sometimes when a new boss comes on board and then all of a sudden Tuesday Tap Outs! have to go away (Tuesday Tap Outs! are this thing where everyone in the office has to wear tap shoes and then you all cut out around 2 o’clock for early happy hours at that super sad bar near the discount medical supply warehouse) because she doesn’t understand how important they are? And you have to start wearing pants?

The CFPB — Consumer Financial Protection Bureau — is sort of the New Boss around these parts, picking up a lot of the stuff the FTC wants to shed. Because it’s the New Boss, and because it’s trying to make a name for itself as a Big Deal, it’s paying attention to things the old boss (the FTC) didn’t. Like, for instance, private student loan providers.

“[Private lenders have] been operating in the shadows for too long,” the CFPB said in a release. “Shedding light on this industry will benefit students, lenders, and the market as a whole.”

Sure. Probably. But maybe it won’t so much benefit those private student loan lenders — banks and guys named Carl who run a thing out of a pawn shop. The CFPB has started gathering information about that industry, requesting information on industry practices such as loan underwriting criteria, repayment terms and what efforts are made to prevent defaults. It’s seeking comments from both the public — i.e. consumers — and the industry for the next 60 days.

This new scrutiny isn’t out of the blue. As this Reuters article points out, the CFPB and the Education Department are required to produce a report on the private student loan industry by mid-2012.

There’s a little bit of breathing room for a portion of the private student loan industry: until the CFPB finds a director — it’s currently captainless because Ohio Attorney General Richard Cordray’s nomination to the post has been mired in political shenanigans — the CFPB will not be able to supervise private student lenders that are not banks.