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The federal government is investigating allegations of botched customer service by loan processing companies over their handling of questions about the resumption of student-loan repayments following a three-year pandemic pause, the Wall Street Journal reported. Borrowers have said that they faced long delays on customer-service lines, with many hanging up after hearing estimates of lengthy wait times, people familiar with the matter said. Borrowers have also complained about the guidance that customer-service representatives or the companies’ automated systems are providing. The Consumer Financial Protection Bureau is leading the inquiry. The probe comes as the federal student-loan system undergoes its biggest changes in decades. Borrowers recently started to make their first student-loan payments since the pandemic hit. Millions are making payments for the first time or had their accounts moved to a new servicer. The government is rolling out generous repayment programs for subsets of borrowers. And the Biden administration is trying again to cancel debt on a large scale after the Supreme Court blocked its first try in June. The government’s scrutiny is focused on the small group of companies with contracts to process federal student loans: Mohela, Nelnet, Edfinancial and Aidvantage, which are routinely examined by the CFPB.

The restart of student loan payments may already be straining borrowers. The Census Bureau found that 41.2% of adults reported difficulties paying household expenses in its latest household pulse survey that polled respondents from Sept. 20 to Oct. 2, YahooFinance.com reported. That was up from 37.3% from the previous two-week polling period between Aug. 23 to Sept. 4 and the highest share on record since the survey first began asking that question in August 2020. Specifically, "the difficulties with paying household expenses were concentrated among households with a college degree, making between $50,000 and $150,000, suggesting that restarting student loan payments is the source of increased financial stress for consumers," Torsten Slok, chief economist of Apollo Global Management, wrote this week. That data provides the earliest indications of the kind of impact those repayments — which started this month for nearly 27 million borrowers — could have on both households and the economy as a whole after the 43-month pause helped boost stability and allowed many borrowers to make financial strides.

Top U.S. banking regulators struggled for more than five years to update anti-redlining rules aimed at making banks lend more in lower-income communities. On Tuesday, they completed a revamp of them for the era of online banking, the Wall Street Journal reported. The 1977 Community Reinvestment Act sought to end banks’ historical practice of denying or limiting financial services in minority neighborhoods. The current rules, which are nearly 30 years old, generally require banks to serve everyone in the communities surrounding their branches, including lower-income people. Regulators say that those requirements are outdated in a world in which much financial activity happens over the Internet and with mobile phones, so they updated them to focus more on where banks do business, rather than just their physical locations. "The final rule takes a critical step forward in modernizing the CRA regulations,” Michael Barr, the Federal Reserve’s vice chair for banking supervision, said. Banks said a 2022 proposed version of the new rules would have made it too challenging to get the highest rating when regulators assess banks for their compliance with the requirements, potentially leading firms to pull back on their investments in low-income communities. Industry lawyers have compared the dynamic to a professor telling a class that nobody will likely get a perfect test score, leading students to try less to do well. Agency officials told reporters on Tuesday that they had made adjustments to the final version of the rules and that it will be possible for banks to get outstanding ratings. Some industry officials, in their initial response to the 1,500 pages of the new requirements, said changes from last year’s proposal would likely satisfy many lenders’ criticisms.

Policy actions taken during the pandemic led to "the most equitable" recovery in recent history, a new government report found, YahooFinance.com reported. The study released yesterday by the Treasury Department found that the president’s American Rescue Plan Act (ARPA), along with actions taken by state and local governments, prevented the worst economic outcomes for Black and Hispanic families during the COVID pandemic, groups that were the hardest hit during that time and have historically been more vulnerable to downturns. The federal aid — including stimulus checks, rental assistance, and the expanded child tax credit — in combination with local support and the Federal Reserve efforts helped sustain Black and Hispanic household finances, narrow the wealth gap, and improve some economic indicators relative to the pre-pandemic period. Read more.

Click here to access the full Treasury Department report.