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

Significantly, the CFPB released a revised set of review procedures outlining how it will review student loan providers, including schools that offer institutional loans. The updated review procedures note the CFPB’s position that “[p]Private loans for education sometimes take non-traditional forms such as temporary loans and revenue-sharing agreements.

Prior to joining the CFPB, Director Rohit Chopra was deeply concerned about the rise of alternative education financing products such as Revenue Sharing Agreements (ISAs). The CFPB recently entered into a consent order with an ISA provider in which it asserted that ISAs are loans, a legal conclusion that is disputed by the fledgling ISA industry. The CFPB’s new review procedures further confirm the CFPB’s position in this regard.

The review procedures require reviewers to “[d]determine whether a supervised entity uses payment plans or temporary credits for all or part of its programs. So-called “payment plans” that involve the deferral of a consumer’s payment obligation and may constitute private education loans subject the education provider to CFPB oversight as well as various laws of States relating to retail installment sales, debt collection and student loan servicing.

Post-secondary institutions should review their payment policies to validate that they have appropriate policies and procedures regarding any tuition payment deferrals, as well as their debt collection and other holdback policies transcripts.

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