WASHINGTON (Reuters) – The U.S. Consumer Financial Protection Bureau (CFPB) will begin examining for-profit colleges’ in-house private loans program as it ramps up scrutiny of the student loan sector under its new Democratic leadership, the agency said on Thursday.
CFPB examiners will review loan origination and servicing, focusing on colleges that improperly accelerate payments, fail to issue refunds, or which restrict class enrollment or withhold academic transcripts from students that owe debt, it said.
The CFPB currently oversees private student loans from outside lenders, but the new policy would see it examine colleges’ in-house private loan programs for the first time.
The new policy could expose colleges to potential enforcement action if the CFPB finds wrongdoing.
It comes as President Joe Biden’s Democratic administration aims to get a grip on the country’s student loan crisis and ramp up scrutiny of private loan providers, as well as address inequities in Americans’ access to higher education.
“Schools that offer students loans to attend their classes have a lot of power over their students’ education and financial future,” said CFPB Director Rohit Chopra. “It’s time to open up the books on institutional student lending to ensure all students with private student loans are not harmed by illegal practices.”
Schools have not historically been subject to the same servicing and origination oversight as traditional lenders.
The CFPB says its concerns are based on past abuses during the mid-2000s, where schools charged struggling students extortionate interest rates and later strong-armed them with debt collection practices, it added.
(Reporting by Katanga Johnson in Washington; Editing by Michelle Price and David Gregorio)