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CBA Member Banks Lead Student Lending Industry, Ensure Bankruptcy and Death Do Not Place Good-Standing Loans into Default
Washington, D.C. – Furthering its commitment to student loan consumers across the nation, members of the Consumer Bankers Association’s (CBA) Education Funding Committee who originate loans are bringing certainty to consumers by clarifying a long-time policy that their banks will not place a good-standing loan in default in the event a co-signer files for bankruptcy or dies. In addition, the change makes sure such terms remain in place even if a loan is transferred to another entity. Banks making these changes include some of the nation’s largest private student lenders. Today, the private student loan market makes up roughly 7.5 percent of the overall $1.36 trillion student loan market.
In a letter to the Consumer Financial Protection Bureau (CFPB), CEO Richard Hunt explained these Education Funding Committee members have changed or are changing their contracts to better reflect what the retail banking industry stands for: helping American families finance higher education by offering private education loans with clear, fair, and responsible terms and conditions that work for consumers.
“We want to ensure hard-working Americans who have been responsible and wanted nothing but to further their future should not be negatively impacted by difficult circumstances, such as the death of a loved one,” said CBA President and Chief Executive Officer Richard Hunt. “Our banks are committed to helping America’s students succeed, and their robust underwriting standards, plus strong servicing programs to assist their borrowers throughout the life of the loan, are helping families meet their obligations. Private student borrowers have real options and are provided arguably the strongest consumer protection: a robust underwriting process that includes an ability-to-repay test. In all cases, it is in the private lender's best interest to do everything in its power to help borrowers repay their loans.”
Richard Cordray, Director of the CFPB, noted the CBA’s announcement and highlighted the benefit it will have on new student loan consumers.
The Consumer Bankers Association is the trade association for today's leaders in retail banking - banking services geared toward consumers and small businesses. The nation's largest financial institutions, as well as many regional banks, are CBA corporate members, collectively holding two-thirds of the industry's total assets. CBA’s mission is to preserve and promote the retail banking industry as it strives to fulfill the financial needs of the American consumer and small business.