WASHINGTON (AP) — The federal consumer finance watchdog is expanding its oversight to Sallie Mae and other companies that collect student loan payments.
A rule issued Tuesday by the Consumer Financial Protection Bureau extends the agency's supervision to nonbank companies that manage large volumes of student loans on behalf of lenders.
The CFPB already oversees banks that service student loans, but it says most student loans are serviced by nonbank companies. It says the scrutiny is needed to ensure servicers comply with consumer laws at a time when more people are falling behind on their student loan payments.
Nonbank loan servicers like Sallie Mae manage borrowers' accounts and answer their questions. Borrowers have complained that the companies lose paperwork or fail to credit payments.
Sallie Mae also is the biggest U.S. student lender.
Martha Holler, a spokeswoman for Sallie Mae, said that as the largest U.S. servicer of student loans, "We have been engaged with the CFPB in the review of our lending, servicing and collections operations."
In addition to Sallie Mae, formally known as SLM Corp., other nonbank companies that service student loans include American Education Services, Nelnet Inc. and ACS Education Services, which is owned by Xerox Corp. The seven largest servicers cover a combined total of about 49 million borrower accounts, representing most of the student loan servicing market, according to the CFPB. The agency said it expects all seven companies will come under its supervision.
Outstanding student debt in the U.S. totals about $1.2 trillion, according to the CFPB, and an estimated 7 million student loan borrowers are currently in default.
Under the new rule, which takes effect March 1, any nonbank student loan servicer that handles more than 1 million borrower accounts will be subject to the agency's oversight. That means the agency will monitor the companies and examine their internal procedures, data and other information.
While borrowers usually can choose their student lender, they normally have no choice over which company services the loan.
"Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules," CFPB Director Richard Cordray said in a statement. "This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers."
The agency is the primary federal supervisor for a range of industries, including payday loan companies, student lenders, mortgage companies, credit bureaus and debt collectors. It was established by the 2010 financial overhaul law enacted in response to the crisis that started in 2008.
St. Louis Mayor Francis Slay will be in Jefferson City Tuesday to testify in favor of tax breaks aimed at luring Boeing's 777X plant to St. Louis.
Yesterday, a bill was introduced that would expand state tax credit programs by $150 million for aerospace companies that create at least 2,000 jobs in Missouri.
Slay will make the case to a Senate subcommittee that landing the Boeing plant would be good for the St. Louis region and the whole state.
Governor Jay Nixon says Missouri is facing a December 10th deadline to submit an offer to Boeing.
CHICAGO (AP) — Candidates running for Illinois governor in 2014 have started shaping up their positions on a new pension proposal that lawmakers are expected to consider this week.
Republican venture capitalist Bruce Rauner said in an email yesterday to supporters that it's the wrong deal for Illinois. He says the savings are insufficient and he doesn't agree with how lawmakers reached the agreement.
Meanwhile Republican state Sen. Bill Brady says he's in favor. In a statement, he says that it's package of "meaningful reforms" that would strengthen Illinois' fiscal stability. Brady sat on a bipartisan pension panel for months.
Last week, the state's four legislative leaders announced some details of the deal aimed at solving the state's nearly $100 billion pension crisis. It's estimated to save about $160 billion over three decades.