Supervision and Regulation Letters

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SR 19-2:

Voluntary Private Education Loan Rehabilitation Programs

BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551

DIVISION OF
SUPERVISION AND REGULATION

SR 19-2
February 4, 2019

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK

SUBJECT:

Voluntary Private Education Loan Rehabilitation Programs

Applicability to Community Banking Organizations:  This advisory applies to all financial institutions supervised by the Federal Reserve, regardless of the institution’s asset size.

Purpose

The Board of Governors of the Federal Reserve System (the Board) and the Federal Deposit Insurance Corporation are issuing the attached advisory to inform financial institutions about the provisions in section 602 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).1 Section 602 establishes requirements for voluntary private education loan rehabilitation programs, under which a consumer may request the removal of a reported default on a private education loan from his or her credit report. Section 602 does not require a financial institution to offer a loan rehabilitation program that meets the conditions set forth in the statute, as participation is voluntary.

Financial institutions choosing to offer a private education loan rehabilitation program under section 602 should take into account safety and soundness factors, such as safe and sound lending practices and underwriting principles, and must seek the written approval of the terms and conditions of the program from the appropriate federal banking agency.  Institutions supervised by the Board should submit approval requests to the appropriate Reserve Bank, to which the Board has delegated the authority to provide approval. A financial institution supervised by the Board is encouraged to contact the appropriate Reserve Bank prior to requesting approval. In reviewing a financial institution's request for approval, the appropriate Reserve Bank will consider the basis for the financial institution's assessment of the number of consecutive on-time monthly payments that demonstrate the consumer's renewed ability and willingness to repay the loan in light of safety and soundness factors.

Federal Reserve Banks should distribute this advisory to state member banks, bank and savings and loan holding companies (including their non-bank subsidiaries), and U.S. branches and agencies of foreign banking organizations and to appropriate supervisory staff.

Questions regarding this advisory may be directed to Peter Clifford, Manager, Risk Policy, at (202) 785-6057; and Donald N. Gabbai, Lead Financial Institution and Policy Analyst, Risk Policy, at (202) 452-3358. In addition, questions may be sent via the Board's public website.2

signed by
Michael S. Gibson
Director
Division of
Supervision and Regulation

Attachments:
Notes:
  1. Pub. L. No. 115-174, 132 Stat. 1296 (May 24, 2018).  Return to text
  2. See http://www.federalreserve.gov/apps/contactus/feedback.aspx.  Return to text
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Last Update: February 04, 2019