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Posts from June 2011

Get Ready to Conquer Your Student Loans


More than two-thirds of students who go to college borrow money to pay for it. The average graduating senior has over $23,000 in student loan debt. As we enter the summer months, students are preparing for work, job-hunting, or getting ready for additional school or time off. But it is also time to start thinking about and planning to repay those loans.

The rules governing Federal and private student loans, from application to repayment, vary depending on the type of loan. As you plan for repayment, make sure you understand the different types of loans you have and what the rules are.

Repaying federal student loans
For most federal student loans, there is a six-month grace period after leaving school. After this point, you will need to start making payments. Most American college students would need to start making payments between October and December of their graduation year. The standard federal loan repayment plan will have your loans all paid off in 10 years.

If you’re interested in the current balance of your Federal loans, check out the National Student Loan Data System. This system will tell you the amount you owe, as well as your servicer (the company that is responsible for collecting payments from you). You can then go to your servicer’s website, register to view your account online, and choose options like automatic debit or other payment options.

Repaying private student loans
Private student loans do not have a standard repayment process. Some you may have started paying off while in school; some may have a grace period condition similar to Federal loans. You should contact your lender or servicer for more information about when to start repayment and what the payment schedule is.

Whether private or public, staying on top of loan repayment is a shared responsibility between the borrower and the lender. If you are a borrower, it is in your best interest to make sure you understand the repayment schedule, and to make sure the servicer knows how to reach you. The best way to make sure you pay on time is to make sure you receive the bill on time, so tell the lender if you relocate. Unpaid balances continue to accrue interest, and late payments can result in penalties.

One more very important note for new grads: Generally speaking, both Federal and private student loans cannot be forgiven through the personal bankruptcy process. You will owe payments until your loans are repaid, so planning ahead for repayment is essential.

Keep checking the blog. We’ll be publishing some additional information on loan repayment, including opportunities to change your repayment plan to better suit your financial situation.

Know Before You Owe: We’re Back!


Last month, we introduced the Know Before You Owe project to give consumers, lenders, and other industry participants a way to help us make mortgage shopping easier. You responded with more than 13,000 comments, and we listened.

We appreciate the time you took to give us those comments. Your feedback was largely consistent with the one-on-one interviews we conducted with consumers, lenders, and brokers, and we’ve incorporated much of it into our new prototypes. Thank you for helping us on our effort to provide consumers with the information they need to understand and compare mortgage offers and to find the one that works best for them. We want lenders to present this information as simply, clearly, and effectively as possible.

So now we’re asking for your input once again. We want you to tell us what you think of the new versions. Know Before You Owe graphic that links to Feedback Tool

In the first round, the back page was the same on both versions. The front page – the “shopping sheet” – was different. This time, the first page is the same on both versions, and our focus is on the back page, which deals with closing costs: how well do these new drafts communicate that information?

A few words about the new sample forms, which come to us from the (fictitious, of course) Redbud Credit Union and Dogwood Credit Union

  • The revised first page features the dark tabs and yes/no buttons from the Ficus Bank draft from Round 1. Both Round 1 forms generally performed well, but some groups of consumers found the Ficus Bank format easier to use, so we kept many of the Ficus design elements. The new prototype also integrates several of the best Pecan features, and it reorganizes and clarifies the information to reflect the lessons we learned from Round 1. Again, this time, the first page is the same for both prototypes.
  • The second pages of the Round 2 forms provide alternative approaches to showing closing costs, so that we can focus in on how much detail is helpful to consumers.

Just like last time, here are a few questions we’d like you to keep in mind as you review:

  • Would this form help consumers understand the closing costs associated with their loans?
  • Could lenders and brokers clearly and easily explain the form to their customers?
  • What would you like to see improved on the form? Is there some way to make things a little bit clearer?

We will consider the information submitted through our website as we analyze the information we receive in the in-depth interviews to further revise the prototypes. This round is open for feedback until Tuesday, July 5, at 7pm Eastern time. You can participate any time between now and then, but the sooner you tell us the earlier we’ll be able to start thinking about how to improve on these forms for the next round. Send us your feedback today!

Mortgage Disclosure Is Heating Up


Previously, we talked about participation by people from locations all over the country in the Know Before You Owe project. Today, we want to share some insights about what we heard – or really, what we saw – from your feedback.

The tool we built let users give us feedback in two basic ways:

  • By looking at our two draft disclosures and picking the one that they thought worked best.
  • By clicking on specific parts of the forms and providing comments on what was or wasn’t helpful.
  • More than 14,000 people submitted a choice between the two forms, and we got more than 13,000 individual comments connected to specific elements of the form. While these comments are not a statistically representative sample of all consumers, they are an invaluable source of information.
Sample heatmap. Click to view larger.

Sample heatmap from the first round of Know Before You Owe. Click to view larger.

We have compiled these comments, and our Mortgage Disclosure team is reviewing them for insights as they create the next draft of this important form.

We were also able to compile the 13,000+ clicks into something called a heatmap.

Our feedback tool recorded where users clicked as they reviewed the draft disclosures. A heatmap is a way of displaying those clicks as a graphic that shows which areas were clicked on most. Simply put, it’s a way for us to see, at a glance, what areas of our draft disclosures attracted the most and least attention.

What you see on the right is one of eight heatmaps we made. The white/red sections received the most clicks; the purple/gray sections received the fewest. This particular map aggregates reviews of the “Ficus Bank” form by consumers who said they preferred it to our other prototype, which we labeled “Pecan Bank.”

So, what can this image tell us? Here are a few highlights:

  • Respondents were interested in the bottom line. The full loan amount at the top of the page, the projected payments section at the bottom of the page, and the estimated closing payment on the second page all received a lot of clicks.
  • People had a great deal to say about the “Key Loan Terms” and “Cautions” sections.
  • People commented on the first page of the draft form much more than on the second. This is a pretty common occurrence, and on its own, it serves as helpful advice for our designers about where to put certain important information. But the information on the second page (like closing costs, for example) is also an essential part of mortgage disclosure. That’s why the next round of testing will focus on the second page.

Heatmaps are also easy to compare. Here, for example, are heatmaps of the two forms. These represent clicks from consumers who preferred the form they reviewed:

Sample heatmap. Click to view larger.

Click to view larger. N = 3,676 clicks on the form.

Sample heatmap. Click to view larger.

Click to view larger. N = 2,563 clicks on the form.

These sorts of comparisons can help us see and understand a few things:

  • How the two different formats drew attention to different parts of the form.
  • Differences between what consumers and lenders commented on. (For example, industry reviewers were very interested in applicant or lender information at the top of the form. Consumer reviewers paid less attention to that.)
  • Differences between what positive and negative reviewers noticed on a form.

Of course, heatmaps can only show so much. In this case, the heatmaps raised a number of interesting questions. To find answers, we carefully read and analyzed the comments themselves.

There is symmetry here: heatmaps make it easier to understand and compare data. We want to improve disclosure so it is easier for consumers and lenders to understand and compare when they evaluate mortgage loans. Thanks again to all who provided feedback in helping to move the project forward.

13,000 Lessons Learned


As you might recall, the Dodd-Frank Act instructed the CFPB to replace the Truth in Lending form and the Good Faith Estimate with a single integrated mortgage disclosure. Instead of two forms that are long and complicated and contain overlapping information, our aim is to design a single form that is easier to explain and understand.

We wanted to hear from the people who would be using the new form. In May, we launched Know Before You Owe to give consumers, lenders and other stakeholders a platform to give us feedback. You responded in a big way.

Next week, we’ll be asking for input again. To get an email when we do, sign up here if you haven’t already.

To learn what your feedback from the first round of tests told us, read on.

We posted two initial versions of the new disclosure form, the “Ficus” form and the “Pecan” form. We asked users to tell us which form they thought was more effective, then to leave comments on specific elements of one of them. Altogether, we received 13,096 of these comments. More than seven thousand came through the consumer version of the feedback tool and more than five thousand through the industry version.

Thanks to everyone who submitted comments. We have spent the last several weeks reading them, and we want to share with you some of what we read.

  • “These issues are things I worry about, but are usually hidden in fine print. I like that it is obvious.” We’re so glad you think so—we put a lot of time and effort into those drafts, so that was really encouraging. More than half of the comments asked us to keep something about the initial drafts we posted last month, often because it was helpful or easy to understand.
  • The sections that received the most attention were Cautions, Key Loan Terms (Ficus), and Summary (Pecan), which collectively received 31% of the comments. Most of you thought these sections were useful, but you also offered thoughtful suggestions about how to make them clearer and easier to understand. Both online and in the first round of one-on-one consumer testing, a lot of people thought that the “Ficus” Key Loan Terms section was easier to follow than the “Pecan” version. But others thought it was useful to have all the Cautions in one place as they are on the “Pecan” form. We’re going to try to do both: As you’ll see next week, we’ve revised these sections in an effort to combine the most helpful aspects of each design.
  • The second most talked-about part of the forms was the Projected Payments section, with 20% of comments. Many people found this section useful. For instance, one reader wrote that it “clearly states what I might be facing in the future.” However, many of you found the way we presented the information unclear, and you didn’t always agree with each other about where to put this section. Some were confused by seeing the payment information before the key loan terms; others liked it at the top because “at first glance, you can see if the closing amount and monthly payments are affordable.” We’ve used your comments to help us revise the layout.
  • The Comparisons section attracted a lot of interest (8% of comments), because it would be “helpful if shopping around for loans.” But on our first attempt, the language confused many of you and our in-person testing participants. We’ve used that feedback to simplify and clarify the section.

One last note: We were delighted to get so many constructive comments. We are still thinking about how best to implement many of the suggestions we received, so just because we did not address a particular feature in this round does not mean it won’t change in future rounds.

When we launch another round of Know Before You Owe next week, you’ll see that the focus of our online tool has shifted. Last time, we asked for feedback on the whole form. This time, we are going to focus a little more closely on one aspect: how effective the form is at communicating closing costs. Closing costs are complicated, and we need your help to make sure our form deals with them in the clearest way possible.

We are committed to creating a simpler form that works for consumers and lenders. But we can only do that with your continued input.

We will have more details about the next round when we launch. Sign up to get an email alert to make sure you have your say.

Explainer: What is a nonbank, and what makes one “larger”?


Dear CFPB,

I noticed you posted a request for public comments on “larger participants” for your “nonbank supervision” program. I don’t understand what this is about. I know what a bank is – I walk past one every day on my way to work – but what is a nonbank? And larger than what, anyway?


Dear Consumer,

Those are great questions. You’re not the first person to read the phrase “nonbank” and lapse into a state of confusion. “What is a nonbank?” you ask yourself. Worry no more! The CFPB Web Team is on the case, with help from our Nonbank Supervision team. Here’s the lowdown:

The Dodd-Frank Act – the law that created the CFPB – gave us the job of supervising large banks, thrifts, and credit unions, and other financial institutions. Supervision, as we’ve explained previously, involves observing financial institutions — for example, by asking for information about their practices or conducting examinations. In our case, we do this mainly to make sure they comply with federal laws that protect consumers.

Bank supervision isn’t new. What is new is that, for the first time, under the Dodd-Frank Act, many nonbank financial companies will also be subject to federal supervision.

So what IS a nonbank? For our purposes, a nonbank is a company that offers consumer financial products or services, but does not have a bank, thrift, or credit union charter and does not take deposits.

Huh? Today, there are thousands of companies that offer financial products that are not banks, and consumers interact with them on a regular basis. If you’ve taken out a payday loan, received a call from a debt collector, or accessed your credit report, you probably have interacted with one, too. Other kinds of nonbanks include finance companies or companies that wire or send money for you.

Products from nonbanks form a significant chunk of the overall consumer financial marketplace. The number of nonbank companies that provide consumer financial products and services has grown over the last few decades. Under Dodd-Frank, many of these nonbanks will be subject to a federal supervision program for the first time.

What’s a “larger participant”? Our nonbank supervision program may look at all sizes of nonbank mortgage companies, payday lenders, and private student lenders. But Dodd-Frank says that in other markets, the Bureau’s supervision program generally covers only institutions that are “larger participant[s] of a market for other consumer financial products or services.”

“Larger”? Larger than what? Well, that’s what the CFPB has to figure out. Congress did not set the thresholds for inclusion in this supervision program for these other markets. Congress required that we define what these size thresholds should be, so we can lay the foundation to start this part of our nonbank supervision program. In other words, it’s our job to figure out exactly how large “larger” really is.

How do you do that? We start by asking the public for input. We’ve posted a Notice and Request for Comment on some important questions that need answers, like how to set thresholds and criteria for defining larger participants, and what markets we should cover in our initial rule. We’ll also conduct our own analysis to determine what threshold works best, but since this decision affects millions of consumers – including you – we are asking for input from everyone who wants to give it.

Can you end this blog post with a clever segue? We can! Now that you know what a nonbank is and why they matter, please take a moment to look at the Notice and file comments as indicated there. We want your input.


Know Before You Owe, Credit Unions, and Community Banks


As you have been reading here on the blog, we released the first draft versions of a combined Good Faith Estimate and Truth in Lending disclosure form in May. Here on the website, we asked for public feedback through the Know Before You Owe project. We’ve also been talking to some of the institutions that will have to use these forms with their customers.

Shortly after Know Before You Owe launched, I was a guest at the New Hampshire and Vermont Bankers Associations’ annual compliance conference. I was struck by participants’ enthusiastic response to the project. Many attendees mentioned that they were impressed not only by the lower burden imposed by the draft forms, but also by the CFPB’s eagerness to solicit feedback at an early stage of the process.

We also spoke with community bankers from Connecticut, Rhode Island, and Massachusetts when they stopped by the CFPB office. Steve Antonakes, the CFPB’s Assistant Director for Large Bank Supervision, and I answered a variety of questions and gathered input from individual bankers about each of their views. One banker suggested that we conduct outreach to the software providers who help create mortgage disclosure forms. This will help bring the technological concerns around building these forms into the process.

Later that afternoon, we discussed the Know Before You Owe forms with individuals from 20 credit unions who each shared their own opinions. This ad hoc meeting lead to valuable, specific insights on what mortgage information works best for consumers.

We are committed to remaining attentive to the concerns of credit unions and community banks throughout the development of CFPB priorities, and we look forward to continuing this dialogue for future CFPB initiatives.

A mortgage loan market that works for all Americans benefits from input from many places. We wanted to make sure individuals from credit unions and community banks were heard from alongside the consumers they serve and other stakeholders.

The CFPB plans to issue a regulatory proposal on mortgage disclosure for public comment in the future.