What Does the CFPB Complaint Database Tell Us About the Quality of Servicing of Student Loans?

14 February 2018
Dr. Faten Sabry and David Cen, et al.

On 18 January 2017, the Consumer Financial Protection Bureau filed a lawsuit against a large student loan servicer that manages over $300 billion in federal and private loans for more than 12 million borrowers. The CFPB alleged that the servicer failed to provide borrowers with adequate information about repayment plans when borrowers were unable to pay, and that it did not help them identify eligibility for and enrollment in income-based repayment plans.

In this litigation, the CFPB relied on the number of complaints that borrowers and co-signers filed with the Bureau in its Consumer Complaint Database. The CFPB focuses exclusively on the number of complaints when ranking student loan servicers in its Annual Reports of the Student Loan Ombudsman. Academic sources note that the Bureau uses the Consumer Complaint Database to inform rulemaking, enforcement actions, and consumer education. The database also helps the CFPB process consumer complaints and provides some information about problems that consumers face. However, there are statistical and economic limitations that may render the number of complaints or the complaint rates unreliable for evaluating whether a company is appropriately conducting business.

In a new whitepaper, Managing Director Dr. Faten Sabry and Analyst David Cen, et al. illustrate potential limitations of relying on the volume or rate of complaints filed with the Bureau by borrowers and co-signers of student loans, as reported in the Consumer Complaint Database, as a basis for the CFPB’s regulatory actions against servicers of student loans and/or to develop servicer rankings in reports used to educate consumers.