Some lawmakers are concerned that the student loan industry has spiraled out of control, and they’re hoping to make state regulators crack down. Their effort was killed in a House of Delegates committee late Tuesday, though.
Student loan servicing companies face increasing scrutiny across the country, and the Consumer Financial Protection Bureau has documented examples of these companies shortchanging and deceiving customers. Lawsuits allege they’ve cheated and misled borrowers.
“We’ve got a real problem with our student loan services. Many of them are predators,” says state Senator Janet Howell. She has a bill that’s already passed the Senate that would crack down on these companies, forcing them to get a Virginia license and answer to state regulators.
“One of the things that very few people understand is that students, borrowers, have no say in over who their servicer is," Howell says. "They are assigned, and once they are assigned they have no ability to change the servicer.”
Delegate Marcus Simon had a similar bill on the House side, although it never got out of committee. “The industry thinks that they are regulated enough at the federal level. Obviously we disagree. The CFPB really hasn’t taken much interest and Betsy Devos and the Department of Education haven’t really shown much interest in reigning these folks in.”
Senator Howell’s bill will be heard in the House this week, and she says student borrowers deserve better than what they’re getting.