FROM “CAVEAT emptor” TO “CAVEAT VENDITOR”

1. FROM “CAVEAT emptor” TO “CAVEAT VENDITOR” CONSUMER FINANCIAL PROTECTION AND THE COLLEGE STUDENT DIANA MATEER, UAT

2. ed’S NEW PARTNER-- THE “cfpb” • Consumer Financial Protection Bureau (CFPB) • Established as part of Dodd-Frank Wall Street Reform and Consumer Financial Protection Act passed in July 2010 • “Watchdog” partner of other agencies • Response by President Obama and Congress to : • -- Role of uninformed consumers in financial crisis • -- Need to monitor actions of providers of financial • products and services, and that includes higher • education institutions!

3. a brief historical perspective • The movement from caveat emptor to caveat venditor • -- College students became a consumer class of interest • *Private student loan customers • *Users of taxpayer dollars • *Buyers of higher education services • Perceptions that students need consumer protections in part because: • --Predatory schools and lenders exist • ---First generation college students can’t rely on family experiences to help them choose • ---Veterans are vulnerable • ---People may be misled when looking for a quick fix to unemployment

4. Enter the cfpb…. • Entire sections of CFPB legislation devoted to private loans • --Private Student Loan Ombudsman (Rohit Chopra) • --Authority to regulate private student loans • *Rulemaking • *Program review of private student loan lenders • Another section of legislation devoted to veterans’ services • --Office of Service Member Affairs directed by Holly Patraeus • Veterans’ Principles of Excellence • --CFPB consults on enforcement of principles and institutional • compliance with them • Know Before You Owe • --Philosophy of comparison shopping • ---Establishes partnership between CFPB and ED

5. The cfpb and private student lending • Born from concern that many students do not exhaust federal aid eligibility before turning to private education loans • --Studied this premise in CFPB’s first private loan report • Private loans are hard for students to compare and keep track of • --Private loans not on NSLDS • Students need an advocate (private loan ombudsman) and a formal complaint mechanism • --CFPB established both • Private lenders need to be monitored to assure compliance with existing consumer lending laws -- CFPB has this authority • Students need help getting a clear picture of their total student loan repayment • --Student Debt Repayment Assistant

6. CFPB and ED issue private loan report • Required report to Congress issued in July 2012 -- Studied the borrowing boom from 2004-2008 *Compared lending practices to subprime housing market *Characterized by direct-to-consumer marketing *Non-bank lenders grew fast, and died even faster • Joint recommendations for private loans made by CFPB and ED • -- Mandatory school certification • -- More debt management and mitigation options • -- Change definition of private loan • -- NSLDS type of private loan tracking system

7. Another report issued by cfpb in 10/12 • Ombudsman reports 2,900 complaints received since March 2012 -- 65% related to servicing (billing, deferment/forbearance, credit reports -- 30% problems when unable to pay (default, debt collection) -- 5% loan origination & marketing (difficulty applying, borrower confusion) • Fast-forward to March 2013 • -- Consumer Financial Protection Bureau proposes rule to oversee nonbank student loan servicers (both federal and private “larger participants” that handle more than 1 million borrower accounts) • -- NPRM proposes that CFPB oversee servicer activity for compliance with federal consumer financial laws tio curtail “confusion, dead-ends, and run-arounds

8. Cfpb’s office of service member affairs • Service Members and Veterans are protected class under CFPB • -- Service members subject to sudden deployment • -- They are frequently relocated • -- They have emergencies that lead to unplanned and unique financial issues • They deserve consumer protection to • -- Honor their service commitment to country • -- Protect their government funded benefits

9. Veterans’ principles of excellence • Executive Order signed by President Obama in April Aimed at Schools • -- Service members, veterans, and their families are targets for deceptive, aggressive tactics by some education institutions • * They have “easy” access to funds for education costs from VA • benefits • * VA benefits count toward the 10% in 90-10 rule • *Hard time exercising student loan repayment protections • Institutions “voluntarily” committed to sign Principles of Excellence -- Institutions that signed listed on VA web site

10. CFPB & ED Team up to create financial aid shopping sheet!

11. Financial aid shopping sheet • “Model of what all financial aid award offers should be” • -- Standard format • -- Comparison data for institutions (provided by ED 1/18) • *Graduation rate • *Default rate • *Median borrowing & monthly payment, link to loan repayment information • More than 700 institutions representing more than 1.8M undergraduate students to use in 2013-14 • If you signed Veterans’ Principles of Excellence, you must use for military students

12. USE OF SHOPPING SHEET • Marketing Tool • Add-on to Net Price Calculator • Replacement to Financial Aid Award Offer • Supplement to Financial Aid Award Offer • Do you plan to use the Shopping Sheet at your school, • and if so, how

13. questions