The Consumer Financial Protection Bureau has been busy as of late.
Last week, the agency issued a “no action” letter to the online personal lending company, Upstart, a gesture that shows the CFPB is dedicated to encouraging innovation that will benefit consumers.
Yesterday, the CFPB entered into a consent agreement with National Collegiate Student Loan Trusts that will require the company and its debt collector to pay at least $21.6 million for illegal student loan debt collection practices.
“No Action” Letter
The letter is the first from the CFPB under the agency’s Project Catalyst initiative, which is intended to encourage consumer-friendly innovation in markets for consumer financial products and services.
The letter means that the CFPB has no present intent to recommend supervisory or enforcement action against Upstart with respect to the Equal Credit Opportunity Act. The letter applies to Upstart’s model for underwriting and pricing applicants as described in the company’s application materials.
As a condition of the letter, Upstart, a company that uses alternative data in making credit and pricing decisions, will regularly report lending and compliance information to the CFPB to mitigate risk, and help the CFPB understand the impact of alternative data on lending decision-making.
The information Upstart will provide includes loan applications the company receives, how it decides which loans to approve, and how it will mitigate risk to consumers, as well as information on how its model expands access to credit for traditionally underserved populations.
The CFPB expects this information will further its understanding of how these types of practices impact access to credit generally and for traditionally underserved populations, as well as the application of compliance management systems for these emerging practices.
National Collegiate Loan Trust
The CFPB took action against National Collegiate Loan Trusts for suing for private student loan debt that the company and its debt collector could not prove was owed or was too old to sue over.
The proposed judgment requires an independent audit of all 800,000 student loans in the National Collegiate Student Loan Trusts’ portfolio.
The enforcement action prohibits the National Collegiate Student Loan Trusts, and any company they hire, from attempting to collect, reporting negative credit information or filing lawsuits on any loan the audit shows is unverified or invalid.
It also requires National Collegiate Student Loan Trusts to pay at least $19.1 million, which includes initial redress to harmed consumers, relinquished funds to the U.S. Treasury and a civil money penalty.
Under a separate consent order, Transworld Systems, Inc, the company’s debt collector, is being ordered to pay a $2.5 million civil money penalty.
“The National Collegiate Student Loan Trusts and their debt collector sued consumers for student loans they couldn’t prove were owed and filed false and misleading affidavits in courts across the country,” CFPB Director Richard Cordray said in a statement. “We’re ordering them to pay at least $21.6 million, stopping them from filing illegal lawsuits, and requiring the trusts to thoroughly audit their loan portfolios to identify any other consumers who were harmed.”
