By Tim Devaney - 06/10/14 01:45 PM EDT
The nation's top consumer watchdog said Tuesday he is publicly “shaming” student lenders who pressure college graduates to immediately repay the full amount of their loans when a relative who co-signed dies.
Speaking to the Senate Banking Committee, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray said it is “not right” that student loan providers are targeting college graduates as they mourn the loss of a loved one.
“It was shocking to me,” Cordray said. “Now a days, the vast majority of student loans that people take out have a co-signor, often a parent, maybe a grandparent. What happens is that student will attend school, ultimately graduate, and begin repaying the loans. They may well have a spotless payment history, and yet something happens to their co-signor. At a time when that young person is now affected by the death of their parent or grandparent, we saw student loan servicers calling in the account.”
Sen. Robert MenendezRobert MenendezSenate confirms Obama's long-stalled ambassador to Mexico Democrats block energy spending bill over Iran amendment Senate close to voting on Mexico ambassador MORE (D-N.J.) raised the issue at the hearing and asked Cordray to consider regulations that would help graduates more easily release co-signors so they can avoid this problem.
“That practice to me is extremely unfair to borrowers who have been making their payments on time and their loans are current and in good standing,” Menendez said.
Cordray received mixed reviews of the CFPB's effort to crack down on payday lending.
Sen. Sherrod BrownSherrod BrownBusiness groups heap scorn on proposed arbitration ban Dem senators: Slash executive pay at pension plans seeking benefit cuts Lawmaker offers bill to impose 'exit tax' on expatriating companies MORE (D-Ohio), one of Cordray's biggest supporters in the Senate, said the rules would go a long way toward protecting consumers from unreasonably high interest rates and short repayment plans.
But many Republicans, as well as Sen. Heidi HeitkampHeidi HeitkampReid: Judiciary a 'rubber stamp' for Trump-McConnell oil is changing the world and Washington GOP blocks Obama sanctions czar MORE (D-N.D.), have expressed concerns that this would cut off access to credit for poor people who live paycheck to paycheck and can't get loans elsewhere.
“We need to be mindful that, as we look at this, we don't close off the avenue for that kind of credit,” Heitkamp said.
Heitkamp and Sen. Mike CrapoMike CrapoHousing groups argue Freddie Mac's loss should spur finance reform Bipartisan effort seeks end to budget gimmicks Republicans mum on possibility of Trump filling Supreme Court seat MORE (R-Idaho) also expressed concerns about the CFPB's new plan to collect credit card information from the majority of consumers for a national mortgage database.
“If my math is correct, we're talking about approximately 900 million accounts,” Crapo said. “I have significant concerns about the potential abuse and misuse of that data and the loss of privacy that comes from it.”
“I share Sen. Crapo's concern about the amount of data that's being collected,” Heitkamp said. “I understand the need to have enough to do the analysis, but we need to be very, very mindful of the sensitivities of consumers today about their information. And I think there is a growing insecurity, and if they look at the federal government, we haven't exactly given them a reason to think that we're going to be confidential with it.”