In-house lending programs at for-profit colleges and post-secondary schools will be under the microscope of the federal consumer financial protection agency, according to an update to the agency’s exam procedures published Thursday.
The Consumer Financial Protection Bureau (CFPB) said the update includes a new section on institutional student loans. “As the CFPB begins its supervision, the exam procedures inform industry about practices that CFPB examiners will review, including placing enrollment restrictions, withholding transcripts, improperly accelerating payments, failing to issue refunds, and maintaining improper lending relationships,” the agency said in a release.
The agency said it is concerned about the borrower experience with institutional loans because of past abuses at schools where students were subjected to high interest rates and strong-arm debt collection practices. It singled out schools operated by Corinthian and ITT. In 2015, the agency secured $480 million in forgiveness from the former; in 2019, the CFPB announced a $60 million settlement and an injunction from further loans against the latter.
The agency asserted that the schools it is looking at now have not historically been subject to the same servicing and origination oversight as traditional lenders.
The CFPB also said that Congress gave it supervisory authority over entities that originate private education loans, including institutional loans. When examining institutions offering private education loans, the agency said, in addition to looking at general lending issues, examiners will review the facts around certain actions only schools can take against their students.
Among the issues the agency said its examiners would be looking at are: placing enrollment restrictions, withholding transcripts, improperly accelerating payments, failing to issue refunds, and maintaining improper lending relationships.
Consumer Financial Protection Bureau to Examine Colleges’ In-House Lending Practices