CFPB Faults Loan Servicing for Military Borrowers

July 8, 2015

The Consumer Financial Protection Bureau on Tuesday released a report describing shortcomings the bureau has found in how student loan servicers treat military borrowers, which include improper denial of legal benefits, negative credit reporting and insufficient follow-through on legal protections for military families.

In 2012 the CFPB released an initial report on the issue. Since then, the bureau said, it has handled 1,300 complaints from military borrowers.

For example, the new report found that service members continue to report difficulties in getting interest rates for their loans capped at 6 percent, as the Servicemember Civil Relief Act requires. It also described how servicers fail to grant active-duty members of the military allowed deferments on loan payments, which can lead to surprise delinquencies, defaults and debt collection efforts.

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