Complaints About Student Loan Servicing Increased 429% In Past Year

In the past year, federal regulators and consumer advocates have highlighted issues with student loans and the servicing of these often crippling debts: from finding that educational loans continue to haunt older borrowers, to suing Navient, the largest student loan servicing company. Because of this, it might not come as much of a surprise that the number of complaints the Consumer Financial Protection Bureau received related to student loans has skyrocketed. 

Today, the Bureau released its monthly complaint snapshot [PDF], which shows a 429% increase in student loan complaints received in a year-to-year comparison of just three months.

According to the report, the CFPB received 2,913 complaints from Dec. 2016 to Feb. 2017, a significant increase from the 551 complaints written between Dec. 2015 to Feb. 2016.

The CFPB notes that the surge in complaints is likely tied not only to an increased awareness of student loan servicing issues, but the fact that the Bureau updated its intake form on accepting complaints in Feb. 2016.

Additionally, the Bureau believes that taking “major enforcement action” against a student loan servicer contributed to a student loan complaint volume spike in Jan. 2017.

The CFPB doesn’t explicitly name the company, but the Bureau — along with two states — sued Navient, alleging the company cheated borrowers out of repayment rights.

While the CFPB didn’t provide specific complaint volume for that time, the snapshot shows that Navient was the tenth most complained about company from Oct. 2016 to Dec. 2016, receiving an average of 236 complaints each month.

When the complaints are compared to the same three-month period in Oct. 2015 to Dec. 2015, the CFPB found a 52% increase. In all, the Bureau says it received 10,637 student loans-related complaints for all of 2016.

Rohit Chopra, senior fellow at the Consumer Federation of America, is a former assistant director and student loan ombudsman for the CFPB. He tell Consumerist that Bureau’s snapshot is just the latest finding in a loan line of data point that show signs of big trouble in the broken student loan market.

“The agency’s lawsuit against Navient was a wake-up call to many borrowers that they too may have been preyed upon by the company’s illegal conduct,” he says of the increases, adding that borrowers may also be filing more complaints with the CFPB because companies are more likely to provide an in-writing response through this portal.

Suzanne Martindale, staff attorney for Consumer Union, tells Consumerist that the CPFB’s report provides just another reason why a strong consumer watchdog is needed.

“If anything, this increase shows that there’s a real problem out there – and that consumers increasingly rely on the CFPB to stand up for them,” she said, noting that CFPB provides an outlet for people who would otherwise suffer in silence when financial companies mistreat them.

Other Highlights

The CFPB’s monthly snapshot of complaints also highlighted issues with credit card companies and a national complaint overview.

As of March 1, 2017, the Bureau says it has handled approximately 116,200 credit card complaints, many involving issues related to being billed for fraudulent charges, confusion over reward programs, and being the victims of identity theft.

Of the complaints the CFPB received, the most involved Citibank, Capital One, and JPMorgan Chase. These companies received about 90% of all credit card complaints received by the Bureau from Oct. 2016 to Dec. 2016.

Wells Fargo received the greatest increase credit card complaints — about 99% — when comparing consumer gripes between Oct. 2015 and Dec. 2015 to those received between Oct. 2016 to Dec. 2016.

While the CFPB doesn’t mention it, the increased complaints came immediately after Wells Fargo’s fake account fiasco was uncovered.

In Sept. 2016, the CFPB — along with the Office of the Comptroller of the Currency and the Los Angeles city attorney — ordered the bank to pay $185 million in refunds and penalties after finding that employees opened nearly two million unauthorized consumers accounts in order meet high-pressure sales quotas.

While student loans and credit card companies accounted for many complaints received by the CFPB, it was actually debt collection that was the most-complained about financial product or service.

Of the approximately 26,000 complaints handled in February, there were 7,755 complaints about debt collection.

The second most-complained-about consumer product was credit reporting — accounting for 4,902 complaints — followed by mortgages, which accounted for 3,718 complaints.