Three Things to Ponder on a Friday Morning

March 11, 2016 at 9:05 am Leave a comment

CFPB Increases Scrutiny of Student Loan Auto-Default

The CFPB used this quarterly summary of examination findings to highlight what it considers to be the unfair and deceptive use of so called auto-default provisions in student loans.  As many of you know, private student loan contracts often have a relative as a co-signor or guarantor on the loan with the student.  Since at least 2014, the Bureau has been critical of loan provisions under which the bankruptcy or death of a co-signor puts even current student loans in default.  Since default typically results in the entire amount of the loan being due, these provisions can be a big deal.

According to the CFPB, these default loan clauses are illegal where they are ambiguous because reasonable consumers would not likely interpret the promissory notes to allow their own default based on a co-debtors bankruptcy.  This is an issue that the Bureau would be well advised to provide additional guidance on.  Co-signed student loans provide a mechanism for millions of students to off-set educational expenses.  If the CFPB takes too hard a line on this issue, it could make it more difficult for students to get these loans.

Other issues highlighted by the CFPB include illegal debt collection practices, violations of the Remittance Rule, and inaccuracies about deposit account information provided to credit reporting companies.

How Low Can They Go

Last night’s PBS Newshour highlighted the question of just how low interest rates can go.  The European Central Bank further lowered its already negative interest rates in a further attempt to spur lending.  The report also highlighted this hokey but entertaining interest rate ditty.  It’s worth a listen.

Talk About Bad Succession Planning

Since 2012, the Denver Broncos have been grooming Brock Osweiler to take over for the aging legend, Peyton Manning.  This year, they waffled on whether or not to hand the reigns over to Rock, who started seven games, or go one more round with Manning, whose tank was running below empty.  They did the safe thing, went with Manning, but now find themselves without a quarterback.  A clearly P.O.’d Brock has signed with the Houston Texans.  Let’s hope that not many credit union boards are making the same mistake.

Entry filed under: Compliance, Economy, General, Regulatory. Tags: , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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