NAICU Washington Update

CFPB Regulates Transcript Withholding Practices

October 06, 2022

A report released this week by the Consumer Financial Protection Bureau (CFPB) found that institutions had violated the Consumer Financial Protection Act (CFPA) by withholding the official transcripts of students who owe money as a blanket policy.  As a result, the CFPB is prohibiting institutions from withholding transcripts from students who were extended credit by the institution as a means to retrieve payment. 
Among the new requirements that have the attention of colleges and universities that offer institutional loans, the report states that any institution withholding transcripts for these purposes will be expected to self-identify violations and compliance risks; proactively provide complete remediation to all affected students; and report these actions to the CFPB.  Also concerning is the possible expansion of the definition of “extension of credit” to include tuition payment plans or other means of lending students credit.
The CFPA gives the CFPB the authority to supervise nonbanks that offer or provide private education loans, including institutions of higher education.  Earlier this year, the CFPB announced its intent to examine the operations of institutional lenders.
This week’s announcement by the CFPB puts the final language in the Institutional and Programmatic Eligibility Negotiated Rulemaking Committee into question. That proposal was publicly negotiated last winter as part of an extensive series of new student aid regulations being planned for next year. NAICU was a key player in those conversations.
The final language proposed by the Department of Education in those sessions would only prohibit an institution from withholding a transcript if an error was made in administering Title IV aid to the student, or any fraud or misconduct by the institution or its personnel existed, unless the error was the result of fraud on the part of the student.
The Department identified that a Notice of Proposed Rulemaking regarding transcript withholding will be out in April 2023. Given the stronger approach by the CFPB, the Department could decide to reflect the CFPB report when its rule is proposed next spring. 
Institutions should review their transcript withholding policies to ensure they are clear and transparent for students. The CFPB also has a portal in which feedback can be provided directly on this new guidance at

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