CBA Letter to Director Cordray RE: Accelerated Default

October 14, 2016

The Honorable Richard Cordray


Consumer Financial Protection Bureau

1700 G Street NW

Washington, DC 20552

Dear Director Cordray:

The Consumer Bankers Association (CBA) appreciates your ongoing concern for student loan customers.  We also appreciate the opportunity to work constructively with you and your team at the Consumer Financial Protection Bureau for the benefit of these consumers.  We would like to take this opportunity to update you on the default practices of our member banks in the event that a co-signer of a private education loan dies or files for bankruptcy.  CBA surveyed banks that are actively originating private student loans and are members of the CBA Education Funding Committee (“member banks”) to determine relevant policies in place, and actions permitted under promissory notes, when the co-signer of a loan in good standing passes away or files for bankruptcy.

We are pleased to report, as we have in the past, that pursuant to policy, all member banks do not accelerate or place a good-standing loan in default due to a co-signer’s death or bankruptcy filing.  Each member bank abides by such a policy regardless of whether or not the lender is contractually permitted to take such action.  All of our member banks have also changed their private education loan promissory notes so the death of a co-signer does not provide a basis for accelerating or placing a good-standing loan in default.  Additionally, almost all of our member banks have changed their private education loan promissory notes so a bankruptcy filing by a co-signer does not provide a basis for accelerating or placing a good-standing loan in default, and the rest are in the process of implementing this change.  These revised contract terms apply to new loans evidenced by the updated promissory notes; however, member banks follow the same policy with respect to existing loans.

Our member banks remain committed to helping American families finance higher education by offering private education loans with clear, fair, and responsible terms and conditions that work for consumers and lenders.  We share our customers’ interest in successfully repaying their loans, including during difficult circumstances, such as the death of a loved one.

Thank you for the opportunity to clarify this matter for you.


Richard Hunt

President and CEO

Consumer Bankers Association

cc: Seth Frotman, CFPB Student Loan Ombudsman