CFPB announces crackdown on ‘home loan’ programs offered by colleges and universities | Manatt, Phelps & Phillips, LLP

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Significantly, the CFPB released a revised set of screening procedures outlining how it will screen student loan providers, including schools that offer institutional loans. The updated audit procedures point to the CFPB’s position that “[p]Private education loans sometimes take unconventional forms, such as term loans and income-sharing arrangements.”

Before joining the CFPB, Director Rohit Chopra was vocal about the rise of alternative education financing products such as Income Share Agreements (ISAs). The CFPB recently entered into a consent order with an ISA provider alleging that ISAs are loans, a legal conclusion disputed by the burgeoning ISA industry. The CFPB’s new audit procedures further confirm the CFPB’s position in this regard.

The examination procedures require examiners to: “[d]to determine whether a regulated entity uses payment plans or temporary loans for all or a portion of its programs.” So-called “payment plans,” which involve deferring a consumer’s payment obligation and may constitute private educational loans, are subject to the oversight of education providers by the CFPB and various state laws relating to retail installment sales, collections and servicing of student loans.

Post-secondary educational institutions should review their payment policies to ensure they have appropriate policies and procedures regarding tuition deferrals, as well as their policies on collection and other transcript retention.

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