Consumer Issues
Another way student loans are like mortgages: Subpar servicing in the US

The companies handling private student loans -- much like those handling mortgages -- sometimes add to the frustration and even the debt load of struggling borrowers

The parallels between the mortgage market and the student loan industry have been frequently noted. Both involve big borrowing and have a history of lax underwriting by lenders. But the two are also strikingly similar in another way: When it comes to both mortgages and student debt, the servicers, or companies that handle loan payments, sometimes add roadblocks and give struggling borrowers the runaround.


That's the main takeaway from two recent reports by the Consumer Financial Protection Bureau, the independent agency created by the financial reform law passed in 2010.


Servicers have misapplied payments, given borrowers bad advice, and reported incorrect information to credit bureaus, according to one of the reports. The findings were based on the agency's recent tracking of student loan complaints, focusing on the companies who handle private student loans.

Borrowers facing hardship and looking for flexibility through refinancing or a more manageable repayment plan "struggled to get an answer from their lender or servicer," wrote the agency's Student Loan Ombudsman, Rohit Chopra. When they tried to postpone payments, they were sometimes charged a recurring fee to do so.


And even when servicers encouraged borrowers to make "good faith" partial payments in amounts they could afford, the payments sometimes still resulted in delinquency or default, according to the report.


As we've noted in our reporting, private loans often don't have the same protections as federal loans: Death and disability discharges typically are not guaranteed or are decided on a case-by-case basis.


And when the loans are packaged and sold to investors, it's even harder to know who has the authority to make decisions about repayment options, discharges, or other issues that arise: "Borrowers report that sometimes servicers cannot even answer who owns a loan," noted an agency factsheet. Homeowners have faced similar trouble.


Sometimes, the parallels are exact. By law, members of the military are entitled to special protections, including lower interest rates on both mortgages and student loans. But thousands have been overcharged on their mortgages. And according to the government's second report, service members have also had the same problem with student loans. The report, which focused exclusively on the loan debt of military borrowers, blamed the overcharging on servicing errors and demands for unnecessary documentation.


The report also noted that loan servicers at times "guided" members of the military into putting loans into deferment or forbearance — even though interest accrues during those periods, and there may be better options available.

Of the more than 2,000 consumer complaints received by the CFPB from March and September of this year, the two most complained-about servicers were Sallie Mae, representing 46 percent of complaints, and American Education Services, or PHEAA, with 12 percent.

(The complaints, the report noted, were not "particularly disproportionate" to each companies' servicing volume. Sallie Mae has "modified $1.1 billion in private education loans with interest rate reductions or extended repayment since 2009," said spokeswoman Patricia Christel. A spokesman for American Education Services, Mike Reiber, said the servicer's customer service representatives "work daily with borrowers to explain repayment options and to help them avoid delinquency and default using all available means.")

Though the focus was on the servicing of private student loans, it's worth noting that many of the companies servicing loans in the private market are the same contractors handling federal loans.


Perhaps unsurprisingly, borrowers of federal student loans have also faced some of the same challenges as those with private loans. For instance: Since last fall, the Department of Education has been transferring some borrowers to new servicers it's contracted with to handle federal student loans — often resulting in confusion for borrowers, some of whom have even seen their repayment plans changed.


Currently, the Department has roughly a dozen servicers, with a new company added to the federal loan servicer team every few months. The expanding system of federal loan servicing can be confusing not only for borrowers who've been switched to new companies, but also for colleges who now have to deal with many more companies than they had to in the past.


The CFPB's report recommended that Congress assess whether more could be done to improve the quality of loan servicing and consider ways to encourage loan modifications and refinancing for struggling borrowers. Such efforts have been underway to help struggling homeowners, with mixed results.




'I lost my phone inside a cow' among top mobile insurance claims

The team at a UK-based mobile insurance company has heard some bizarre excuses customers have made to claim insurance

London: Do you know anybody who lost his mobile inside a cow or someone who baked her handset into a sponge cake? The team at a UK-based mobile insurance company has heard it all in some bizarre excuses customers have made to claim insurance in the last twelve months, reports PTI.
The company's list of top ten weirdest mobile insurance claims was topped by a farmer in Devon who claimed his phone had disappeared inside the back end of one of his cows when he'd been using the torch on his mobile while assisting the cow during calving, The Mirror reported.
The phone later made an appearance, but was damaged.
Placed number two on the list was a lady in her early 40s from Nottingham who claimed that she'd baked her phone into a Victoria Sponge she'd been making for her daughter's birthday.
A woman in her 30s claimed she'd been walking her Cocker Spaniel on Barry Island beach, Wales, when a seagull swooped down and took her mobile from her hand.
A 20-year old girl from Bristol claimed the vibration function on her phone had stopped working while she was using it as an adult toy, said.
A 40-year-old construction worker said his cellphone had fallen out of his back pocket when he pulled his jeans down before sitting on the toilet. Not realising, he went about his business and flushed the chain.
The phone didn't flush, but underwent serious water damage.
A man in his 30s claimed he'd been filming monkeys from the car window in Longleat Safari Park with his mobile handset when a monkey climbed on the roof and snatched it.
The list also included a couple who lost their phone over the side of their cruise ship while re-enacting the "I'm King of the World!" scene, while trying to take a photo of themselves.
A pyrotechnician was setting up a show for the National Fireworks Championships in Plymouth, and having left his mobile within the "blast zone", it was nowhere to be found when he returned post-show, having been fired 3,000 feet into the air before exploding in a stunning display.
A young woman from Liverpool admitted she'd thrown her phone at her boyfriend, whom she'd discovered cheating, but it missed him and hit a wall, breaking the handset.
A man who was filming a Blur event on his cellphone from a nearby tree got a little too excited as the band came on stage and dropped his phone onto the ground below.


SEBI revokes ban on three executives of Tijaria Polypipes

Preliminary findings of the SEBI probe revealed that Tijaria Polypipes diverted substantial part of the IPO proceeds, 'through layered transactions', to certain entities

New Delhi: Securities and Exchange Board of India (SEBI) has revoked a ban imposed on two independent directors and a company secretary of Tijaria Polypipes Ltd related to alleged diversion of proceeds from the company's initial public offering (IPO), reports PTI.
The market regulator in December last year had barred Tijaria Polypipes' two independent directors -- Pawan Kumar Jain and Pana Chand Jain -- along with company secretary Tej Kumar Jain from the securities market till further directions.
Revoking the ban, SEBI said that considering various factors, the "benefit of doubt" can be given to the three people.
Preliminary findings of the SEBI probe into the fall in shares of Tijaria Polypipes revealed that the company had diverted substantial part of the IPO proceeds, "through layered transactions", to certain entities.
The IPO, to raise about Rs60 crore, was from 27-29 September 2011.
According to SEBI, Tijaria Polypipes in its prospectus dated 12 September 2011, had declared that it had not raised any bridge loan against the proceeds of the IPO.
However, the company's board, at their meeting in September the same year, had decided to raise Inter Corporate Deposits to meet the working capital requirements while their repayments had to be from the IPO proceeds.
SEBI, in its order, said there is not enough evidence to suggest that the independent directors and company secretary were aware of the board's decisions during the meeting on 10th September.
Taking into consideration the period of prohibition already undergone by the entities vis-a-vis the findings of investigations, SEBI whole time member Prashant Saran said, "I am inclined to give Pawan Kumar Jain, Pana Chand Jain and Tej Kumar Jain the benefit of doubt".
Pawan Kumar Jain resigned from the post of independent director on 5 January 2012, it added.
The ban on the three individuals has been revoked with immediate effect.


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